I think the economy is in horrible shape I think that's one of the reasons that President Biden is so unpopular because I think a lot of the people who are struggling in this economy in part blame the president he's not solely responsible but he certainly hasn't done anything to help everything he's done has actually taken a bad situation and made it worse but if you look objectively at the data the savings rate is at the lowest it's been since 2007 I think it's down to 2.3% so Americans have blown through all their stimulus money and
now they're pretty much broke if you look at credit card debt it's at an all-time record high so Americans are struggling to put food on the table and to pay the electric bill and so they're borrowing more money on their credit cards if you look at what's happening to wages they are declining in real terms and I think the real decline is being masked by the fact that we are understating inflation I think the actual inflation rate is about double what the government will admit to and that means that the real decline in wages is
much greater which explains why so many people are now Moonlighting a record number of Americans have two and three jobs in fact you have more Americans than ever that are working two full-time jobs most people don't want multiple jobs they would prefer to be able to support themselves and their family on one job but unfortunately in the Biden economy that's not possible and that's where all these jobs that are being created are going they're going to people who don't want more jobs but who are forced to take them anyway because that's the only way that
they can keep up with the rising cost of living they're being very disingenuous and that's a nice way of putting it about these numbers because the implication is that oh 260,000 people who didn't have jobs who were unemployed now they've got jobs that's not what happened all of those jobs went to people who were already employed they are part-time jobs that's what's happening and it's not a great economy where people who have jobs need to get a second job they would rather have the Leisure they would rather be able to spend more time with their
families but unfortunately they can't afford that they have to go and get another job and that is where these jobs are coming from if people come out of retirement let's say somebody was retired they're 70 years old they were looking forward to just playing golf and going to the beach and hanging out with their grandkids but now they have to go take a job at Target because that's the only way to pay the grocery bill do you want to brag about creating an economy where unemployed people are forced to go back into the workforce H
the main reason that the unemployment rate is so low is so many people who aren't working are not counted as being unemployed we have over 100 million working age Americans who are no longer in the labor market but I'm sure a lot of the people there are just discouraged workers you know you don't count if you've basically given up looking for a job because you don't think there's a job out there that you're qualified for at a wage that you know makes sense for you to take the job after a year you don't count even
in the U6 number which includes discouraged workers and people who are only working part-time but would prefer to work full-time and who are still looking for full-time employment but can't find it there the unemployment rate I think is closer to 7% but even that unemployment rate once you've been discouraged for over a year you're no longer counted in that number either so I think if you objectively measured the unemployment rate and included all the people who are not working but who would be working if they believe they can find a job or who have settled
for a part-time job when they'd prefer a full-time job I'm sure the actual unemployment rate is in the double digits the savings rate again is 2.3% that's the most recent number that was released last week by the government we haven't had savings that low since 2005 but one of the reasons that Americans weren't saving in 2005 is because they had so much home equity they were just getting rich off the real estate that was the peak of the real estate bubble but right now Americans are losing their home equity real estate prices are now falling
but what's more problematic is real wages are falling because the cost of living is going up and credit card debt has exploded so if Americans really had all this Savings credit card debt wouldn't be skyrocketing the reason credit card debt is going up so much is because people don't have savings they can't afford to buy things things they have to borrow the money but more of the money that they're borrowing is being spent on food it's being spent on electricity on gas I mean look at all the big retailers that are reporting that their customers
are spending more money on food and less money on everything else because food is so expensive the credit card situation is scary it's a sickening feeling to see those cards run up and the people who run it up the vast majority of people I think who have enormous credit card debt are buying things they do need and they'd rather not have it on credit but they don't have the cash it's stomach turning to see the bills run up and to see the interest rates go up and the interest rates go up and up and up
and I can only imagine it would make people feel kind of angry at the FED for you know every time they raise one of these rates you owe more yeah you're looking at credit card rates now that are about 20% and that is a huge amount of interest to pay and you know I think a lot of people today have a lot more Consumer Debt than just their credit card debt because over the last last few years a lot of these buy now pay later companies have come into existence people are using those companies to
buy stuff without money but it doesn't show up in the credit card numbers because it's not credit card debt but it's still debt that the consumer is obligated to repay and I don't believe they're going to be able to do it it seems insurmountable what happens is there some credit card default crisis that is the mirror image of the housing crisis you referenced 2005 and going into the 2008 collapse what's going to happen with all that credit card debt yeah you know the credit card debt is non-secure if you don't pay it the credit card
company you know they can't come after your assets they can't put a lean on your house or try to go after your IRA the debt is very difficult to collect if the person doesn't have any money it's also dischargeable in bankruptcy we haven't seen a big spike up in credit card delinquencies but I think that's coming and you know what also happens with credit card debt is once somebody with credit card debt recognizes that they can't pay it back and they've decided they're not going to pay it back or that they're going to file for
bankruptcy what they will do before is Max out the credit cards they'll just borrow as much money as they can because whatever they're buying they're getting for free right so if you're planning on going bankrupt and you have 50,000 worth of credit card debt but you still have another 50,000 that you can borrow well you're going to do it you're going to go out and spend the other 50,000 and buy as much stuff as you can because when you go bankrupt you don't have to that stuff if you go out and you buy a bunch
of clothes and some consumer electronics or take a vacation and then you file for bankruptcy you don't have to give any of that stuff back and it makes sense that before you file for bankruptcy to buy as much as you can because once you declare bankruptcy you're not going to get any new credit cards for a while so you might as well buy everything you can before you go bankrupt so you get that moral hazard that's going to accelerate the losses for the banks that are issuing the credit explain to me why there are these
predictions by you by Jamie diam of others of an impending recession when the FED is doing everything it can to prevent that and we're seeing layoffs at companies is it not going according to plan I'm not even sure they have a plan but I think we're already in a recession and the rate increases are partially responsible for that I think the recession is going to get a lot worse now that doesn't mean the FED shouldn't be raising rates they should be they should already have raised them a lot more than they have the problem was
they never should have cut them that was the mistake was cutting rates raising them back up is really just an acknowledgement of that mistake but what happens is when the FED raises rates it uncovers all of the problems that it created when it reduced rates because when it slashed interest rates to zero it inflated a bubble economy and it inflated it with inflation quantitative easing was inflation it's just another word to describe inflation it's just that a lot of people don't realize that it is inflation because inflation has a bad connotation to it quantitative ing
doesn't sound as bad if the FED said our policy is to create inflation the public would have said wait a minute I don't want inflation so if they say well our policy is quantitative easing then you don't have as many people critical of the policy but we're now experiencing the consequences of that inflation Rising prices and prices still have a long way to go and that's one of the reasons I think that the recession is going to get a lot worse because more consumer income is going to be diverted to Necessities like food energy rent
Insurance things like that and interest rates are going to have to keep Rising that's also going to take a lot of purchasing power out of the economy because people have to service their debt and if you're spending money paying interest on the money you borrowed to buy stuff in the past you have less money left over to buy stuff in the present and in the future and that's what helps bring about a more severe recession most people's stock portfolios are going to continue to fall most people who own stocks unfortunately own the most overvalued stocks
big tech for example those are the stocks that went up the most because interest rates were zero and people thought that inflation would be low forever well now that interest rates are not zero and inflation is here and getting worse those stock valuations are coming down I think they still have a long way to fall most people will lose money in the stock market I think they'll fare even worse in the bond market even though yields are higher now on bonds they're not nearly high enough to offset inflation people are going to lose a lot
in bonds so they have to start thinking outside the box and look towards alternative types of investing you can still invest in stocks but you can't invest in the indexes that are so dominated by overpriced Tech names you have to be more discriminating in the stocks you buy you have to select the stocks based on value and dividend yield and just build your own portfolio rather than just you know buying these indexes and I think the best values are had abroad I think the highest dividend yields are outside the US and I think that also
gives you the benefit of a hedge against what I believe is going to be a very weak US dollar the dollar is up on the year but it's losing those gains rapidly but I think over the next several years we're going to see a very weak dollar as the markets come to terms with the reality that inflation is not only going to get higher but it's here to stay it's not going back down to 2% and that's going to result in a run on the dollar I think and on US dollar denominated assets especially when
the Federal Reserve actually has to go back to quantitative easing which is creating more inflation because the economy gets so bad that it actually turns into a financial crisis and now the FED is under a lot of pressure to try to stimulate the economy but the only way you can do that is by creating even more inflation just to point to the jobs that are being lost these are full-time jobs high-paying jobs with Benefits the jobs that we're creating are part-time jobs with low pay and no benefits so it's not even tradeoff when you look
at the jobs we're losing and the jobs that are being created to replace those lost jobs but I think this is just early in the layoffs I think the layoffs are going to be very widespread and in fact some companies are going to be laying off 100% of their Workforce because they're going to be going bankrupt but a lot of companies are going to be laying off a lot of workers to avoid going bankrupt because they have to start cutting their costs and one of the cost that they can cut is labor when you cut
your labor you have to eliminate employees and the reason reason for this is that company's real sales are going down because their customers are broke so they can't afford to buy as many products and so the companies selling those products or Services don't need as many workers to help provide those goods and services and employers are looking at higher interest rates if they've borrowed money which a lot of employers have borrowed money to buy Capital Equipment that they might need their rent might be going up their office space and their other raw material costs are
rising and so they have to figure out how to get by because businesses need to generate a profit because that's the way the owners of the business make money off the business if they don't have a profit they have to figure out how to create one or they're going to go out of business and so one way would be to scale back the size of the business and that means reducing your headcount and that's going to go on across the economy and of course there are a lot of companies that never should have been created
in the first place that only were created as a consequence of monetary policy of cheap money and the casino like environment that the FED created in the stock market you have a lot of companies that have never made any money but they have a lot of employees well they were selling stocks to investors and they were using that money to pay their workers but if the appetite for shares of money losing companies is no longer there a lot of these companies aren't going to be able to stay in business and to the extent that they
can stay in business it will only be if they can dramatically downsize their operations and start generating a profit and that probably means they have to eliminate most of their Workforce they have to go down you know people buy homes the vast majority of Americans who buy homes use a mortgage they don't have the money to buy a house they don't even have the money for a down payment the average down payment has been I think 5% now it used to be 20% but people don't have the savings to put down 20% they're borrowing the
money so the most important factor in home affordability isn't the price of the house but the mortgage rate and mortgage rates a year ago were in the low threes now they're almost seven you've had a doubling in the interest on a mortgage and that dramatically reduces how much somebody can pay for a house and so home prices are going to have to fall sharply because that's the only way anybody can afford to buy them now of course there won't be a lot of homes on the market for a while because people are not going to
build them because it's too expensive to build them and people can't afford to buy them and a lot of the people who own homes don't want to leave because if they sell their house they can't buy another one because the mortgage on the new house could be double the mortgage they have on their current house so they're kind of stuck so that's helping to mitigate the supply a bit but ultimately I think the prices are going to be determined by demand and what people are able to pay and with higher mortgage rates they're able to
pay a lot less and so prices are going to come down a lot and that means home equity is going to vanish for a lot of people who you know are in their homes they're not going to have all that equity and that's going to have a big impact psychologically on their saving and their spending on their ability to use their house as an asset for a loan or something like that but even though home prices are going to be coming down the cost of home ownership is going to be going way up because even
if you buy a house that's gone down 20 or 30% based on where mortgages are your monthly payment will still be higher than the payment would have been had you bought the house a year or two ago at a lower price but with a much lower mortgage insurance rates are skyrocketing I mean the insurance on my own house in Connecticut in one year was up 40% and people have sent me copies of their homeowners insurance that has gone up a lot more than that so Insurance costs are skyrocketing maintenance cost if something goes wrong with
your house and you need to fix it the cost of repairing anything the parts the material the labor all of that has gone way up property taxes are going up your utility bill the cost to heat the house to air condition everything is going up so home ownership is getting a lot more expensive so fewer and fewer Americans will be able to afford to own a home let alone buy one a lot of stuff happened at the peak of the bubble but all that has to be Unwound as the air comes out the only way
they're going to bring down inflation and restore price stability is to crash the economy one of the Senators asked pal if he was willing to do whatever it takes like Paul vulker to bring down inflation will you do whatever it takes and pal basically said yes we will do whatever it takes which obviously is not the case because if the Fed was willing to do whatever it takes it would have already done it there is no reason to have allowed inflation to get this bad in fact if the investors believed that pal was going to
do whatever it takes to bring down inflation the stock market would have crashed the bond market would have crashed in fact one of the questions that pal got was how he was going to fight inflation without harming the economy or causing a recession now the real answer would have been I can't if we're going to fight inflation we're going to have a recession there's just no way around it we're going to have to raise interest rates substantially we're going to have to cut down on the growth of the money supply and the entire recovery that
we had the economy was built on cheap money so we're going to take that cheap money away which we need to do then the entire economy that was built on top of it is going to come collapsing down so no we can't fight inflation without hurting the economy right we had a horrible recession under Paul vuler interest rates went up but what pal told Congress was hey don't worry I'm going to raise interest rates we're going to shrink the balance sheet but we're going to do it with care we're going to be careful and make
sure that nothing that we're doing harms the economy well that is impossible so the only way that pal can raise interest rates with care and shrink the balance sheet with care without harming the economy is to immediately stop the rate hikes or maybe reverse ver them as soon as that harm is obvious that's the only way to do it because you can't do it with care it is impossible but nobody in Congress or nobody at the Federal Reserve wants to tell the truth yes there is some medicine that we've got to swallow but it tastes
bad they all want to pretend that oh it's going to taste great yes we're going to get rid of inflation but don't worry this medicine is delicious it's not and the only way we're not going to taste This Bitter medicine is if we don't swallow it and that's basic what pal was saying in fact Pal's assurance that when it comes to raising interest rate and shrinking the balance sheet that the FED will exercise care to make sure that neither of those policies hurts the economy that is completely inconsistent with his pledge to do whatever it
takes to fight inflation that he's willing to do it Paul vulker style because those two statements are mutually exclusive because if you are committed to doing whatever it takes to fight inflation then you can't exercise care not to hurt the economy because doing whatever it takes means you're willing to hurt the economy you're willing to crash the financial markets if that's what's required to fight inflation which means one of those two statements has to be a lie because they can't both be true and as far as I'm concerned my money is on the fact that
his commitment to doing whatever it takes that's what's not true because I think the minute pal senses that what he's doing is really hurting in the economy or the financial markets then he will be careful he will reverse course and allow inflation to get worse because the FED is going to have to pick its poison and I already know the poison it's going to pick another one of the ridiculous statements that pal made had to do with the unsustainable fiscal path that the US is on because one of the Senators asked pal If the Fed
considered the impact of higher interest rates on the federal budget given the fact that we have 30 trillion in debt when he raises interest rates the cost to the government of servicing that debt is going to go up right so the senator asked pal If the Fed factored that into its policy and pal said no pal said they don't even think about the unsustainable fiscal path they don't even measure it they don't model it as if this is happening in a vacuum which has to be a lie I mean how can the FED possibly not
consider the impact of rising interest rates on the US government when it's obviously the elephant in the room they're going to think about that but not only did pal say that the FED never even considers it it doesn't even matter about it if you combine that with the commitment to do whatever it takes to fight inflation and if they're not even going to consider the impact of that fight on the federal government which is the world's biggest debtor and which has the most to lose if interest rates go way up to fight inflation but not
only did pal make that ridiculous statement he also followed up by saying yes we're on an unsustainable fiscal path but now is not the time to do something about it he said the time to do something about the fiscal problems is when the economy is strong but of course earlier during his testimony he not only said the economy was strong he said it's very strong well which is it now is not the time to deal with our fiscal problems because we have to wait until we have a strong economy when according to poell the economy
is not only strong right now it's very strong if the economy is very strong then why don't we deal with the fiscal problems now the truth is we can never deal with the fiscal problems because then the economy won't be strong because it's a bubble and it's only a bubble because we're not dealing with the fiscal problems in fact it's making the fiscal problem bigger it's blowing more air into the bubble it's going deeper and deeper into death that is the reason that we have this phony recovery and in fact when they were talking about
how strong the economy was under Trump and Trump was talking about we have the strongest economy in the history of the world you didn't hear pal telling Congress at that time hey we've got a strong economy let's start addressing the fiscal imbalances and the unsustainable path that we're on no and in fact pal stated on multiple occasions that the reason we don't have to worry in the short run about the unsustainable path that we're on is because interest rates are really low well now he's saying that he might raise interest rates dramatically like Paul vuler
if that's what it takes to fight inflation yet ignoring the impact that would have on the unsustainable fiscal position of the US government when he's already a knowledge that the only reason it's sustainable now is because we have low interest rates and he may have to remove those low interest rates to fight inflation one of the biggest problems that the FED is looking at is how to shrink this massive balance sheet and you're telling me they haven't spent any time talking about how to do it they're just procrastinated all that I mean maybe one of
the guys at the fomc said hey why don't we try to figure out a plan for how we're going to shrink this balance sheet and someone said n let's just wait you know why do that now let's just hold off and you know we got plenty of time to come up with a plan the reason that they have to lie is because there is no plan because it's impossible there's no way to do this there is no timetable that they can come up with no magic bullet that's going to allow the Federal Reserve to shrink
this massive balance sheet without collapsing the whole economy and so that's why they don't do it in fact probably it's the same reason that they don't want to model how higher interest rates would impact the US government because if they stick that in their model and then run some simulation it's going to show a massive economic implosion so rather than model something that they know is a disaster they're just going to ignore it so they don't have to face reality the fed's goal is to have 2% average obviously the FED has already tossed that out
the window the FED is never going to try to average down the massive inflation that we have right now the FED is going to ignore this incredible increase in the cost of living and simply focus on making sure that that additional in increase in the cost of living is just 2% per year without any regard to what's happened in the past and without trying to average down to high inflation the way the FED claimed it was trying to average up to low inflation of course a lot of the congressmen Senators they wanted to blame the
inflation too on the pandemic right as if Government had absolutely nothing to do with it we could have approached the pandemic very different we didn't have to run these huge deficits we didn't have to print all this money we chose to do that just because the pandemic was the excuse we made the choice and we chose inflation nobody wants to level with the American public and tell them yes we're having to pay this price but this is the cost of all the stimulus you got a check you didn't have a job we sent you money
this is the consequence there's no free lunch nobody wants to admit that now of course consumers are right to expect more inflation but they're wrong to expect it to only be 5.4% it's actually going to be much higher than that so if consumers are this Gloomy based on the expectation that the inflation problem will get better imagine how much gloomier they would be right now if they actually realized that this bad problem is about to get a lot worse so I think there's a lot of room for this index to plunge further as reality rears
its head and consumers realize what's in store for them because they're still getting a lot of propaganda from the government and the media that the worst is behind us and of course all the inflation is simply a function of Russia and Putin in fact the Biden Administration and all of the minions are now talking about Putin's price hikes like every time a price goes up it's all about Putin the Putin price hikes as if the US has absolutely nothing to do with it we're taking the Federal Reserve completely off the hook first it was Co
and now it's Putin and Russia in fact it's still Co whenever they talk about why prices are going up they blame the pandemic they blame Russia and Putin or they blame the greedy corporations in fact Biden is specifically calling out the oil companies the oil companies are responsible for Rising oil prices because they're just not pumping enough oil obviously if they could pump more oil at these higher prices wouldn't they do it I mean don't they want to earn more money don't they want to sell as as much expensive oil as they possibly can the
idea that they're just sitting on all this oil and not selling it is nonsense one of the reasons that oil companies aren't pumping more oil is because of the hostility that the Biden Administration has against the oil industry people are afraid to invest in oil and gas they're worried about more regulations they're worried about more Taxation and that's one of the reasons that I've invested more heavily in international stock stocks I know the US has a proclivity of doing that right as soon as the oil industry really starts to make money they slap a windfall
profit tax on them meanwhile when oil is low they don't get any relief for that but the minute they start making some money they get taxed what kind of message does that send if you're telling these oil companies hey if you ever get to a situation where the oil price is really high we're going to seize your profits because we're going to claim it's a wind fall well that discourages investment in Exploration and development gold has a long way to go up because the fundamentals couldn't be better unlike for the US Stock Market where they
really couldn't be worse the fundamentals for gold couldn't be better that's why it should be pretty obvious that there's still a lot of downside risk in the US Stock Market I mean think about the fundamental backdrop for US Stocks because they remain historically overvalued at a time where the FED is just beginning a rate hiking cycle but it's a long road back to normal let alone tight so we're just starting a tightening cycle yet we have record high valuations we're also on the cusp of a recession you know even if we get a quick resolution
to the Russia Ukraine crisis which we probably won't but even if we do the fundamentals are still horrible and if we don't they're even worse so it's amazing that the US Stock Market hasn't already dropped by a greater degree than it has that doesn't mean it won't it just means that investors are slow to recognize these bearish factors but they are recognizing them and they will weigh down the price of US stocks in the weeks and months ahead
