October 20, 2024 • 34 mins
Vladimir Lenin once said...
"The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation."
While there is controversy as to whether it was in fact Lenin who said that, or the legendary economist John Maynard Keynes, who attributed that line to Lenin following an interview he conducted with the Russian leader...the fact is simple, the US Consumer is being CRUSHED, ground up between the millstones of taxation and inflation.
Here is what Keynes wrote, quoting Lenin...
"As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery."
We have bubbles all over, especially in Consumer Credit, and specifically Credit Card Debt. In fact, the total of US Credit Card Debt has risen ABOVE the level of Household Savings for the first time since 2008, while the Seriously Delinquent Rate rose to 10.83%, the highest since 2008.
With no savings and "real" wage growth that is less than one percent year-year, the Consumer is being ground up and crushed by the "millstone". The Fed WILL be FORCED to respond in the not-so-distant future, a dynamic that will meld into HUGE Trade and Budget Deficits, MASSIVE Government, Consumer and Household Debt, and the onset of the BRICs Unit to replace the USD as the means of "settling" global trade ... ALL point to a LOWER USD, which means HIGHER Commodity prices, and a STAGFLATION defined macro-economic environment ...
and...bullish breakouts in Silver and Bitcoin, in the wake of the push in Gold prices to new all-time highs.
Indeed, Vladimir would be bullish here, on Silver and BTC! Find out why in Season Two, Episode 12 of "Money, Markets & New Age Investing!"
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Greg Weldon (00:00):
Hi, greg Weldon, here back at you with Money
Markets and New Age Investing.
This is Season 2, episodenumber 12.
Oh yeah, man, I mean we'retalking almost 30 episodes now
in the two seasons we've beendoing this, but we have a lot to
cover.
Today.
Us economy is strong.
The labor market the latest254,000 gain in non-farm
(00:24):
payrolls was really robust, uh.
So you know, now they've re.
You know the market has had todo a rethink on what the fed's
going to do going forward.
Maybe they won't be cuttingrates as much as uh had
previously been expected becausethe economy is so strong.
Yeah, no, no, no, it's notstrong.
(00:44):
I don't get the people that aresaying it's strong.
You want to rely on GDP numbersto say the economy's strong.
All I got to say is unwantedinventory build.
That's all I got to say.
It's a positive in GDP andthat's what you have an unwanted
inventory build.
Why?
Because domestic final demandstinks.
The growth here is poor and inmost cases it's below the rate
(01:08):
of inflation.
So real growth kind of doesn'texist.
The consumer is choking rightnow.
The consumer is cocooning rightnow.
The consumer is bloated withnew debt borrowed at the highest
interest rates you know reallysince 1981 to borrow money, and
back then credit cards weren'treally that popular.
(01:30):
I'm going to break it down foryou in the simplest of terms to
show you why you should beconcerned about the economy,
because the economy is not AI,it's not infotech, it's not
chips.
It's still driven by theconsumer, and the consumer is in
(01:50):
trouble.
Let's start with the data, andI'm going to go through this
data really fast, and there's alot to go through and sometimes
I think I give too much numbers,but these are the facts, these
are the stats.
This is the real deal, not thedeal you're getting from
Washington these days, and I'venever been one that says they
fudged the data, but they arenow.
(02:10):
It's obvious and you're goingto see why in just a minute.
Let's start with the mostrecent.
I'm going to work backwardsthrough the data that's come out
over the last eight or ninetrading sessions Manufacturing
production down 0.5 year overyear.
But the point here is it's beendown 16 of the last 22 months.
(02:33):
Manufacturing production hascontracted on a year over year
basis.
In other words, a steady trendto the downside.
Let's talk about capacityutilization.
How much capacity are companiesusing to produce what they're
producing and, in fact, what wesee is that CapU fell to 77.5%.
(02:58):
In other words, 77.5% of ourcapacity to produce goods is
being utilized.
All right, september of 2022,just two years ago was 81.1.
Now it's 77.5.
That is a big decline.
This is something that doesn'tmove that much.
All right, not only that, itwas down from 78 in August.
(03:18):
That's 5.5, a half of 1% in asingle month.
That is massive for this kindof number.
And August, at 78%, wasactually revised down to 77.8.
Like every other number hasbeen revised down.
Even the capacity utilizationis being revised down.
(03:39):
It's not enough that they'rerevising down the labor market
data like crazy.
And let's talk about the labormarket data, because the 254,000
headline gain in nonfarmpayroll employment that was
reported the first week of themonth blew people away and you
had 25 basis points of Fed ratecuts that were priced into the
market for this year, gotdepriced almost instantly.
(04:02):
The reaction to me was sooverdramatic it's not even funny
.
You want to say and I'll tellyou what how many people I heard
on CNBC or I watch Bloomberg,now I don't watch CNBC anymore
that said that the number wasstrong.
Strong payroll is going to keepthe Fed from cutting rates.
It's like, okay, this numberwas not strong.
What are you looking at?
(04:22):
I don't even get it.
Let alone did everyone forgetthat they've revised down every
single payroll number for thelast year by like 600,000 or
something.
I forget what the exact numberwas.
All right, do we forget that,all of a sudden, 254, that's not
like, oh my God, the Fed's notgoing to do what we thought they
were going to do type of number.
It's average for a decent year,but it gets way worse because
(04:48):
when you start to break down thejobs, man, this is anything but
strong.
That is the absolute last wordI would use.
When the number of peopleworking two jobs that are both
part-time jobs because of scantthat's the word they use, the
BLS, scant full-time workavailable.
The number of people workingtwo part-time jobs 2.3 million.
(05:11):
A record high.
When you have a record high anda huge gain in people working
two part-time jobs, that's notstrength, that's stress.
We're mixing up our s wordshere.
Strength, no stress.
Yeah, okay, multiple jobholders.
The total 4.8 million.
(05:32):
Excluding four months in in2023, this would be a record 4.8
million.
So you've been at records sincethe middle of last year.
Five months you've been at arecord high in the total number
of people working multiple jobs.
The total number of peopleworking multiple jobs that are
women sixth highest ever and, ofcourse, what we can talk about
(05:58):
single moms and working multiplejobs, and those are that one is
full-time and the other ispart-time.
The number of people workingtwo full-time jobs is at a
record high.
That is not strength, it'sstress.
They're working multiple jobsbecause they're having trouble
paying the bills and becauseit's scant full-time work
(06:18):
available.
Let's take the $254,000 gain inpayroll employment.
Total employment is up $2.4million from a year ago.
That's not a bad number.
Two million is not bad, butit's down 580,000 since January.
It's lost 17% 18% of its gainin just this year.
(06:44):
Not only that, 2.4 millionisn't what 2.4 million used to
be, because the total number ofappointments at a new high.
We have finally exceeded thepre-pandemic high, even though
we were one of the lastcountries to do so.
But right now the percentagegain is only 1.55.
That's not strong.
(07:05):
It was 2.04 a year ago.
Not only that, at 1.55, it wasunchanged from a month ago.
So the 254,000 increase did notchange at all the
year-over-year change.
It kind of matched last year's.
That's not strong.
The breakdown of this wasn'tstrong.
(07:25):
And then let's look at wages.
Everyone got so excited.
It's strength because it's 254,but it's strength because
average hourly earnings rose byover a dollar and went to 4%
year over year.
And now that's 4% wage growth.
That's good, that's strong.
That's healthy to consumer.
And I had one person, even onBloomberg major brokerage house
(07:46):
person, said the consumer'sbalance sheet is healthy.
Of course that was Bank ofAmerica and they're a big
consumer credit card lender, sothey want the consumer to be
healthy.
These are going to talk theirbook we're going to talk more
about that in a minute.
But average hourly wage is up 4%.
But weekly hours worked fell.
(08:09):
So you're making more per hour,you're working less hours.
The average weekly earnings,the growth, fell.
It fell.
It's 3.4.
All right, not 4%, 3.4.
And why does that make adifference?
Because core CPI is 3.3.
Headline CPI is 2.5, 2.4,excuse me.
So when you take the 3.4 number, at best it's 1% real wage
(08:36):
growth.
That's not enough.
Not enough to keep consumerspending on discretionary items
strong.
There's nothing strong about it.
You want to say the economy'sstrong.
How about housing?
Housing's not strong?
What data are you looking atwhen you say the economy's
strong when housing is in thetoilet.
(08:59):
The 30-year mortgage rate,according to the Mortgage
Bankers Association weekly data,30-year mortgage rate over the
last two weeks excuse me, overthe last four weeks has risen 40
basis points.
It was going to take out 6% andnow it's all the way back above
6.5%.
As a result, the last two-weekapplications for mortgages the
last week fell 17% in a week ontop of the 5% gain from the
(09:22):
previous week.
These are the biggestback-to-back gains we've seen in
a week, on top of the fivepercent gain from the previous
week.
These are the biggestback-to-back gains we've seen in
a decade in mortgageapplications, way more than
anything during 2020 or 20,excuse me, except for the qe, um
, excuse me.
Rather, in 2015 was the lasttime you were at this level, at
this kind of decline, and thatwas as QE was ending after 2014
(09:44):
QE3.
So think about that.
The refinance index fell 26%for the week.
I mean that's amazing.
All right when we talk aboutthis dynamic.
All right, all of the Fed ratecut optimism is gone.
All right, all of the fed ratecut optimism is gone.
(10:06):
Let's talk about the rest of thehousing market because permits
housing permits, building, newbuilding permits down 5.7
percent year-over-year.
Housing starts down 0.7year-over-year and it's sticking
at a very low level.
I mean, you know, belowpandemic levels.
You know, uh, not belowpandemic.
We're heading back towardspandemic levels.
The uh number of uh, thepercent change, percent change
year over year in the homesunder construction fell 11.7,
(10:32):
while completions rose 14.6 butfell six percent for the month.
Now what does all that mathmumbo jumbo mean?
It means this we've justfinished building a lot of homes
because of the demand in allthe homes that were started two
years ago.
We have no new permits.
We have no new starts.
We have the number of homesunder construction plummeting
(10:53):
because we're completing them.
This means less constructionemployment in the very near
future.
How is the economy strong whenthe housing market is virtually
and the mortgage market isvirtually tanking again?
Why?
Because the Fed is restrictive,because they're still so high
relative to inflation with theirpolicy rate and now because of
(11:15):
a payroll number that shouldn'thave elicited this kind of
response.
It got the kind of responsethat was the Fed won't cut again
potentially this year.
It's not 100%.
Even odds they'll cut one moretime, close to 100%, but not
100%.
Let's talk about the bankearnings that came out this week
.
They were rip-roaring.
Morgan Stanley skyrocketed,right.
(11:36):
But the problem is and I sawsome really really stupid
comments on Twitter about howstrong the banks are because of
this number Frankly, it's notreally true.
These numbers, the revenuenumbers and the profitability
was good.
It was all because of arip-roaring stock market.
(11:56):
Over 100% of Bank of America'searnings growth came from three
things trading, interest, incomeand wealth management.
All right, and it was funnybecause the loan loss reserves
up Okay.
Unrealized losses oninvestments for banks Fed just
came out with a report is overhalf a trillion dollars.
(12:19):
Banks hold $4.4 trillion oftreasury and government agency
securities.
The standing losses right noware over half a trillion dollars
.
That's unrealized losses.
They have enough cash to coverit, but it knocks half of their
wipes out, half of their cash ontheir balance sheet, let alone
the loan loss reserves whichwent up to for credit cards
(12:42):
because of delinquency rates andthe failure rates and the
bankruptcies are up too.
All right, and what'sinteresting is Bank of America
said well, consumer spending wasup 3%.
The consumer is strong.
3%, that's the rate ofinflation and it's not consumer
spending, it's up, it's consumeruse of credit cards that Bank
of America has and they'respending more because of the
(13:03):
inflation, because it costs morefor everything.
The increase in credit cardbalances was exactly the same as
the inflation rate.
I mean, come on, man, that'snot strong.
Where's the strength there?
I mean seriously.
Well, let's talk about consumerloans.
All right, because the bankbalance sheets and there's other
(13:23):
forms of consumer loans.
So some of the numbers I'mgoing to give you are different.
Understand they're differentnumbers because they represent
different things.
But it's all about consumerloans.
The bank balance sheet,consumer loans, credit card,
revolving credit $1.9 trillionis up only three one-hundredths
(13:43):
of a percent since June and it'sup only 1.4 year over year.
You can see the slowdown.
The cocooning here is.
Here it's disinflation to themax.
That's not enough, and I'm notsaying it should be higher, but
trust me, I mean this is a bigproblem, but this is the path
we've chosen is to reflatethrough credit.
(14:10):
Right now we're disinflatingthe credit to the point of it
being almost deflation.
A credit crunch is the lastthing the Fed wants to see right
now.
Trust me on that one.
Let's talk about the consumercredit numbers from the Fed,
which includes stuff likefinance agencies and what do you
call them Savings, not savingsand loans, credit unions, stuff
like that?
Right, total consumer creditabove $5 trillion?
(14:31):
All right, it's up a trillionfrom a year ago.
Okay, in August of 2010, it was$2.5 trillion.
So that means in 14 years,you've doubled consumer credit,
doubled 2010,.
After the crisis, after QE,tarp, talf all the money they
(14:52):
printed, consumer credit jumpedin August of 2010 to $2.5
trillion 2.52.
That was a record high at thetime.
All right, in 14 years it'smore than doubled 5.097.
But let's go all the way backto August of 1971, when they
took the dollar off the goldstandard.
At that point, consumer creditwas 400 billion.
(15:17):
Check that 0.4 trillion.
So the so the first two and ahalf trillion was created in 41
years it took to create it andfrom that point forward, 14
years to create the next two anda half trillion.
All right, let's look at thetotal credit card numbers, right
, 1.357 now,1.357 trillion.
(15:40):
All right, it is up over thelast 52 weeks by over $50
billion.
It's been up by over $50billion on a rolling 12-month
basis for 138 consecutive weeks.
That's almost three years.
Think about that 138 weeks.
The constant change year overyear has been 50 billion, 50
(16:04):
billion, 50 billion.
50 billion Adds up every time138 weeks.
All right, the only other timesthat it's been above 50 billion
was five weeks in 2004 and 16weeks in 2008 into 2009, right
before the crisis A total of 21weeks in history, but the last
138 weeks it's been above 50billion.
(16:27):
Let's look at the interest ratespeople have paid.
All right, I'm going to go backMay of 2014,.
I'm going back 10 years In May.
Average interest on creditcards that were actually charged
accrued interest, becausethere's all kinds of different
measures of this that wereactually charged accrued
interest because there's allkinds of different measures of
this 16.82, and these numberscome from the Fed 2014, and
(16:49):
these are May numbers.
We're going back from May.
It's quarterly data that'sreported in the middle of the
quarter 16.82.
May of 2017, 12 points.
11,.
Excuse me, may of 2014 was11.82.
May of 2017, 12.7.
(17:11):
May of 2019, 15.1.
May of 2020,.
In the pandemic it actually fellto 14.5.
So four years ago it was 14.5.
2022, 15.1%.
May of 2023, 20.8%.
It rose 550 basis points whenthe Fed raised rates 450 basis
(17:33):
points.
So credit card rates went up bymore, so banks had to expand
their margins, let alone keepbase with the Fed Since then,
since May of a year ago 23.4.
It was 20.8 last year, it's23.4 now.
Okay, that's up from 11.8, 10years ago.
(17:53):
It is more than doubled in 10years as the consumer credit has
doubled.
The interest rate to borrow hasdoubled.
Banks are cleaning up.
Here's another one for you Acredit card, capital One.
You want to talk aboutbottom-feeding parasites?
Capital One credit cards Offeryou, if you have a lower credit
(18:15):
score, $500 credit and it's a23% rate.
I know someone who got thisoffer.
So you get the offer for $500of credit.
You don't have credit.
You want to build your credit.
It seems like a good deal.
You do it.
You say, look, 23%, that's alot, but I'll borrow and pay it
off every month and it'llimprove my credit.
The problem is it's $25 a monthfee, which over a 12-month
(18:39):
period means $300 in fees, whichis a 60% interest rate to hold
the card.
That should be illegal.
I'm sorry, that isbottom-feeding, parasitic to the
max.
Capital one here's the kicker.
You want to say the consumerbalance sheet is healthy.
You want to say the consumer isstrong?
(19:00):
I throw this one at you.
Total credit card debt 1.35trillion.
Personal savings 1.05.
Credit card debt is 300 billionmore than savings.
There's only one other timethat's been the case 2007 and
2008, right before the crash.
(19:20):
So no wonder, with the highrates and the huge amounts of
credit and all of this, that thedelinquency rates are
skyrocketing.
Fed data seriously delinquentabove 90 days 10.93% of credit
card holders are in delinquencyby over 90 days 10.93 versus 8.0
(19:45):
a year ago.
It's almost 11 versus 8 a yearago.
That's a massive increase.
I mean it's over 50% increase.
All right, let's take the 10.93and look back at 2008.
All right, we went from 8 to10.93.
That's the fastest accelerationon record.
All right.
(20:06):
When you take 2008, when it roseand it was a precursor to the
crisis, the third quarter of2008 was 9.4 delinquency.
Fourth quarter of 2008 got to10.2.
By the first quarter of 2009,it was 11.4.
It's almost to the level thatit was during when the crisis
started.
All right, and was already intofull swing by first quarter of
(20:30):
2009.
And if you remember that,because March of 2009 was the St
Paddy's monetary massacre whenthey introduced QE, tarp and
TALF, you're right there, man.
You're at crisis levels Newlydelinquent 9.05 versus 7.2 a
year ago, versus 1.4 in thethird quarter of 2021, when you
(20:51):
had forbearance and everything,the delinquency rate was 1.39.
Now it's 9.05.
Consider this the third quarterof 2007 was 9.29, pretty much
where it is now by the thirdquarter of 2009, it was 13.8.
The consumer balance sheet isnot healthy.
The consumer is not strong.
(21:12):
It's bull.
It's absolute bull.
Let's take retail sales.
Just came out Really.
Hey, everyone was all excited.
Retail sales stronger thanexpected for the month.
Right, strong is not the word1.7 year-over-year increase.
(21:32):
Even the CPI the lowest of theinflation rates at 2.4, you're
still negative on a real basis.
All of the increase in dollarterms is because of price
increases.
They don't measure that in theCPI, in the retail sales data.
Rather, all right, the retailsales have been negative.
(21:53):
Deflation in retail sales on areal basis 26 of the last 29
months and every single month in2024.
Let's talk about this numberbecause there's something fishy
going on here, just like therehas been in the labor market
number Seasonal adjustments Onan unadjusted basis.
(22:14):
Okay, last year the decline was36.8.
This year, on an unadjustedbasis, the decline was 56
billion.
So you went from 37 billionlast year to 56 billion this
year, yet somehow, miraculously,sales rose.
Let's talk about eating anddrinking establishments.
(22:38):
Why?
Because it's the ultimate indiscretionary spending.
You have more money, you feelhealthy, wealthy and wise.
You're going to go out and eatand drink, right.
If you're not, you're going tostay home.
That's why McDonald's is at arecord high and MGM and some of
the luxury item prices arebreaking down.
All right, eating and drinkingestablishments, unadjusted.
(22:58):
Last year fell by 1.58 inSeptember you know, it's kind of
end of summer, back to school,it normally falls.
It's the seasonal adjustmentthat needs to be made for the
data right.
Last year, unadjusted fell 1.58.
The adjusted number was up 1.63.
So the adjustment was exactly3.1 billion.
This year the adjustment was7.5 billion.
(23:21):
Last year's seasonal adjustmentwas $3 billion.
This year it's $7.5.
What makes this Septemberdifferent than last year Other
than, you know, hurricanes?
No, that's right, that wasOctober, because I heard someone
say that Unadjusted.
This year the decline is $7billion versus last year.
$1.5 billion, $7 billion, andyet the adjusted number is up
(23:46):
$0.5 billion, $550 million.
They fudge these numbers withthe seasonal adjustment.
Retail sales deflation let'stalk about without the price
adjustments, because the priceadjustments makes every number.
I'm going to give you deeper innegative territory
Discretionary items.
The only one that's up isclothing and it had been way
(24:07):
down, so it's a bounce back andit's all based on like two
months of strength, all right.
So, to whatever extent you knowpeople, people bought clothes
and they haven't bought clothesin a while.
Now they bought some clothesagain, all right, but every
other, every other discretionarycategory is down, outside of
online shopping, where theyear-over-year rate of change
has cut in half from 18 monthsago 7.1 still healthy down from
(24:32):
8.1 a month ago, not as healthy.
But every other discretionarysector sporting goods, books and
music down three and a halfpercent year-over-year.
Furniture down 2.3 percentyear-over-year.
Appliances down 4.6% year overyear.
Vehicle sales down just under1% year over year.
What's up?
Personal care, health careitems and food that's not strong
(24:57):
.
How's that strong?
We're buying food andtoothpaste, but we're not buying
sporting goods.
We're not buying books or music.
We're not buying furniture.
We're not buying electronics.
We're not buying appliances.
We're not buying books or music.
We're not buying furniture.
We're not buying electronics,we're not buying appliances.
We're not buying cars.
But the consumer's strongInflation is kind of the problem
, though, because I said here onthis program, I like saying
(25:17):
that I just think it's cool.
On this program.
We talked about inflation.
We called inflation all the way.
Go back and listen I don't haveto blow my own horn because
it's all there on the recordthat inflation would be high.
Then it would come down.
It would be energy, it would bebase effect, it would bottom.
It might even get below threeand then bottom and go back up.
Hello, it's exactly what'shappened and hello, it's rising
(25:38):
again.
The core rate rose this thispast week.
We saw the inflation numbersand maybe there's the end of
last week.
Uh, core rate 3.3, up from 3.2,I mean, versus a 4.75 expected
fed funds rate of the low end ofthe you know, fed funds uh
thing, uh range I mean nowyou're starting to talk about.
(25:59):
Maybe that's why they wouldn'tcut.
The headline rate, though, wasuh two, was uh 2.4, so 2.4
versus 4.75 feds, veryrestrictive still, okay, um, but
what's interesting about thisis that that this was all
gasoline, all right, it was allenergy.
Gas was down 15 in price yearover year.
(26:21):
Food 2.3 year over year, upfrom 2.1 had been below one.
Foods come back, and I'm goingto talk more about food in a
minute.
When you talk about where isthe inflation, it's in services,
service inflation is sticky,near 5%.
I mean more than double theFed's target range.
Service inflation X energy 4.7.
(26:42):
All right, shelter 4.9.
Rent 5.1.
Transportation services 8.5.
And that's up from 7.9 a monthago.
Medical care 3.6, up from 3.2.
Medical care 3.6.
That's way above the Fed'starget rate.
Everyone needs medical care.
All right, let's talk a littlebit about food, because food
(27:05):
five out of six grocerycategories is how they do it.
Five out of six were up.
The one that wasn't up wasunchanged.
None of them were down andwe've had five out of six down
the last couple of months.
This is a major shift in foodprices and it is critical to the
whole dynamic.
Protein it doesn't matterwhether you're a carnivore or a
(27:26):
vegetarian, you got, or apescatarian, you got screwed
here.
Okay, protein meaning meat,poultry, fish and eggs.
That's the category that theygive you all right, this the bls
gives us cpi to the bureau oflabor statistics.
Uh, meat, poultry, fish andeggs is one of the categories.
A 0.8 for the month, that's 10%annualized, and up 3.9 year
(27:47):
over year.
It's double the Fed's targetrate.
To get protein.
Can't live without protein.
You're a veggie?
Okay, fruits and vegetables a0.9 for the month.
That's 10% annualized.
I mean it's huge.
Then we start talking about newhighs in cattle, in ground beef
, in milk, in eggs, in chicken,in cocoa, in coffee, in OJ.
(28:09):
Even sugar is breaking out.
Now we start to get to thestrategy, because dollar down
means commodities up and all ofthis where the Fed is going to
acquiesce to save the consumer.
Because you have stagflationand energy is down big because a
year ago crude oil was $81.
Now it's hovering around $76,so it's still a negative base
(28:30):
effect.
Gasoline prices were down 5%.
The wholesale price reached$1.81, down 15% year over year.
But guess what?
Not all energy is negative anda lot of it's actually now
coming back, particularlynatural gas up 0.5% for the
month, 6% annualized, up 2% yearover year.
It's at the Fed's target,electricity 3.7, almost double
the Fed's target.
(28:50):
So inflation's not dead, theconsumer's not healthy.
And that leaves us with whatStagflation?
Throw in the fact our tradedeficit for goods is over $100
billion outside of four monthsin the pandemic.
That's a record trade deficit.
Our budget deficit another $1.9trillion this year.
The interest on the debt is $1trillion, over a trillion, and
(29:13):
they spent almost twice as muchas they took it in revenue.
It's insanity.
Twin Tower deficit is bad forthe dollar.
You also have the BRICS right.
These countries, like Brazil,like South Africa, like India,
for example right, india has 800billion in official FX reserves
, most of them dollars, most ofthem held in bonds.
(29:34):
They want to participate in theBRICS.
They got to liquidate dollars,take those dollars, sell bonds,
take the dollar proceeds and buygold to back their part of the
currency in the BRICS unit.
So this is why the dollar hasbeen strong, even though it
probably shouldn't be.
Why?
Because the Fed is not cuttingrates.
Other countries are Germaninflation just fell to 1.6.
(29:56):
Italian inflation is 0.7 yearover year.
So the differential between theUS two-year interest rate and
the German two-year interestrate just moved by 50 basis
points.
It had been 135 basis points,just went up to almost 2%.
You've got that kind ofmovement that's going to move
money into dollars.
This has lifted the dollar.
The Bank of Canada is going tocut rates again.
(30:18):
Inflation just fell below theirtarget.
New Zealand is going to cutjust cut.
Bank of England inflation justfell below their target.
They're going to cut again.
The Europeans just cut ratesand the Fed's standing still and
the market's not pricing asmuch rate cuts as they had been.
This is holding the dollar up,which intensifies kind of the
stag part of the stagflation.
But at the end of the day theFed will be forced to acquiesce
(30:42):
to higher inflation to protectthe consumer, to protect growth.
We have too much debt.
It's a debt.
Deflation is the bigger riskthan an inflation.
We need that growth and wedon't have it.
You can't keep paying down thedebt.
You see it in the delinquencyrates already.
This is bad man.
You need the growth and centralbanks will choose to reflate
(31:03):
every single time because theythink they have a beat on
inflation, as Powell just haskind of proven to himself at any
rate.
So what do we do?
We look for the dollar to turndown.
It's reached $103.50-ish.
That was our upside target fora countertrend rally.
You get below $99.50,.
The dollar's going to $90 ormuch lower.
This is a big picture.
(31:23):
It goes all the way back to the70s.
The or much lower.
This is a big picture.
It goes all the way back to the70s.
The purchasing power of thedollar right now, relative to
1971, we went up the goldstandard relative to an ounce of
gold is 3.9 cents.
Your dollar in 1971 would buyyou what 3.9 cents would buy you
today?
That's going to continue.
That's a secular, multi-decadetrend.
That's going to continue.
Commodities the place to be.
(31:44):
We've talked about uranium.
Uranium's coming back.
You see all these companies.
We talked about the need fornuclear energy.
It's more efficient and cleanerthan solar or wind.
It will be big and it is theNLR, the nuclear, the world
nuclear energy ETF, is our toppick.
The URA also in the mix.
We want to be buying commoditiesRight now.
We're involved in the mix.
We want to be buyingcommodities Right now.
(32:06):
We're involved in the ags, likewe just said, with cocoa and
coffee and sugar and cotton.
Even so, that's the and OJ.
By the way, you know you havethe lowest orange crop in
Florida since 1933.
All right.
Even worse is grapefruit Allright.
So you're going to be payinghigher prices for that.
Oj is at record highs, gotalmost to $6 in the wholesale
(32:28):
market.
The DBA is the ETF for that.
We're also looking, of course,at the base metals Interesting
stuff.
I won't talk too much aboutthat, but really, you know we've
been all over the preciousmetals.
You know we've been all overgold and silver and especially
the mining shares there.
I wrote out to my clients onThursday night.
Silver is about to explode,make a big move.
(32:50):
I did a interview with PeterGrandich, the former Wall Street
whiz kid, on Thursday, alsotalking up silver.
Friday silver was up $2.
It's at a new high.
It's not a question if it'sgoing to 40, it's a question of
how quickly it's going to 40.
And we're going to see that too.
In terms of my portfolioplaybook that we send out to our
(33:11):
clients, we have been heavilyallocated to the silver and gold
mining shares and to thenuclear sector, and that has
really paid off as opposed toyou know.
Hey, look at this.
Gold is breaking out againstthe XLK, which is the Infotech
ETF.
And I would throw in one lastthought Bitcoin.
Bitcoin broke out this week.
(33:31):
We got long just above 66,000.
That was our key upside pivot.
If it gets above 70,800, basisthe spot futures contract,
that's a major breakout inBitcoin and a measured move
would put Bitcoin at 95,000.
That could happen soon.
Silver at $40, if not $47 inthe next three to six to 12
(33:54):
months and Bitcoin to 95,000 inthe medium term as well.
Those are the things you canbank on.
If you want some of my research, email me at sales at
weldononlinecom.
Follow me on Twitter at WeldonLive.
Follow the podcast at moneyunderscore podcast and follow me
(34:15):
on YouTube Gregory underscoreWeldon.
Thanks for listening.
We'll be back at you withepisode 13 next month.
Hi, greg Weldon, here back at you with Money
Markets and New Age Investing.
This is Season 2, episodenumber 12.
Oh yeah, man, I mean we'retalking almost 30 episodes now
in the two seasons we've beendoing this, but we have a lot to
cover.
Today.
Us economy is strong.
The labor market the latest254,000 gain in non-farm
(00:24):
payrolls was really robust, uh.
So you know, now they've re.
You know the market has had todo a rethink on what the fed's
going to do going forward.
Maybe they won't be cuttingrates as much as uh had
previously been expected becausethe economy is so strong.
Yeah, no, no, no, it's notstrong.
(00:44):
I don't get the people that aresaying it's strong.
You want to rely on GDP numbersto say the economy's strong.
All I got to say is unwantedinventory build.
That's all I got to say.
It's a positive in GDP andthat's what you have an unwanted
inventory build.
Why?
Because domestic final demandstinks.
The growth here is poor and inmost cases it's below the rate
(01:08):
of inflation.
So real growth kind of doesn'texist.
The consumer is choking rightnow.
The consumer is cocooning rightnow.
The consumer is bloated withnew debt borrowed at the highest
interest rates you know reallysince 1981 to borrow money, and
back then credit cards weren'treally that popular.
(01:30):
I'm going to break it down foryou in the simplest of terms to
show you why you should beconcerned about the economy,
because the economy is not AI,it's not infotech, it's not
chips.
It's still driven by theconsumer, and the consumer is in
(01:50):
trouble.
Let's start with the data, andI'm going to go through this
data really fast, and there's alot to go through and sometimes
I think I give too much numbers,but these are the facts, these
are the stats.
This is the real deal, not thedeal you're getting from
Washington these days, and I'venever been one that says they
fudged the data, but they arenow.
(02:10):
It's obvious and you're goingto see why in just a minute.
Let's start with the mostrecent.
I'm going to work backwardsthrough the data that's come out
over the last eight or ninetrading sessions Manufacturing
production down 0.5 year overyear.
But the point here is it's beendown 16 of the last 22 months.
(02:33):
Manufacturing production hascontracted on a year over year
basis.
In other words, a steady trendto the downside.
Let's talk about capacityutilization.
How much capacity are companiesusing to produce what they're
producing and, in fact, what wesee is that CapU fell to 77.5%.
(02:58):
In other words, 77.5% of ourcapacity to produce goods is
being utilized.
All right, september of 2022,just two years ago was 81.1.
Now it's 77.5.
That is a big decline.
This is something that doesn'tmove that much.
All right, not only that, itwas down from 78 in August.
(03:18):
That's 5.5, a half of 1% in asingle month.
That is massive for this kindof number.
And August, at 78%, wasactually revised down to 77.8.
Like every other number hasbeen revised down.
Even the capacity utilizationis being revised down.
(03:39):
It's not enough that they'rerevising down the labor market
data like crazy.
And let's talk about the labormarket data, because the 254,000
headline gain in nonfarmpayroll employment that was
reported the first week of themonth blew people away and you
had 25 basis points of Fed ratecuts that were priced into the
market for this year, gotdepriced almost instantly.
(04:02):
The reaction to me was sooverdramatic it's not even funny
.
You want to say and I'll tellyou what how many people I heard
on CNBC or I watch Bloomberg,now I don't watch CNBC anymore
that said that the number wasstrong.
Strong payroll is going to keepthe Fed from cutting rates.
It's like, okay, this numberwas not strong.
What are you looking at?
(04:22):
I don't even get it.
Let alone did everyone forgetthat they've revised down every
single payroll number for thelast year by like 600,000 or
something.
I forget what the exact numberwas.
All right, do we forget that,all of a sudden, 254, that's not
like, oh my God, the Fed's notgoing to do what we thought they
were going to do type of number.
It's average for a decent year,but it gets way worse because
(04:48):
when you start to break down thejobs, man, this is anything but
strong.
That is the absolute last wordI would use.
When the number of peopleworking two jobs that are both
part-time jobs because of scantthat's the word they use, the
BLS, scant full-time workavailable.
The number of people workingtwo part-time jobs 2.3 million.
(05:11):
A record high.
When you have a record high anda huge gain in people working
two part-time jobs, that's notstrength, that's stress.
We're mixing up our s wordshere.
Strength, no stress.
Yeah, okay, multiple jobholders.
The total 4.8 million.
(05:32):
Excluding four months in in2023, this would be a record 4.8
million.
So you've been at records sincethe middle of last year.
Five months you've been at arecord high in the total number
of people working multiple jobs.
The total number of peopleworking multiple jobs that are
women sixth highest ever and, ofcourse, what we can talk about
(05:58):
single moms and working multiplejobs, and those are that one is
full-time and the other ispart-time.
The number of people workingtwo full-time jobs is at a
record high.
That is not strength, it'sstress.
They're working multiple jobsbecause they're having trouble
paying the bills and becauseit's scant full-time work
(06:18):
available.
Let's take the $254,000 gain inpayroll employment.
Total employment is up $2.4million from a year ago.
That's not a bad number.
Two million is not bad, butit's down 580,000 since January.
It's lost 17% 18% of its gainin just this year.
(06:44):
Not only that, 2.4 millionisn't what 2.4 million used to
be, because the total number ofappointments at a new high.
We have finally exceeded thepre-pandemic high, even though
we were one of the lastcountries to do so.
But right now the percentagegain is only 1.55.
That's not strong.
(07:05):
It was 2.04 a year ago.
Not only that, at 1.55, it wasunchanged from a month ago.
So the 254,000 increase did notchange at all the
year-over-year change.
It kind of matched last year's.
That's not strong.
The breakdown of this wasn'tstrong.
(07:25):
And then let's look at wages.
Everyone got so excited.
It's strength because it's 254,but it's strength because
average hourly earnings rose byover a dollar and went to 4%
year over year.
And now that's 4% wage growth.
That's good, that's strong.
That's healthy to consumer.
And I had one person, even onBloomberg major brokerage house
(07:46):
person, said the consumer'sbalance sheet is healthy.
Of course that was Bank ofAmerica and they're a big
consumer credit card lender, sothey want the consumer to be
healthy.
These are going to talk theirbook we're going to talk more
about that in a minute.
But average hourly wage is up 4%.
But weekly hours worked fell.
(08:09):
So you're making more per hour,you're working less hours.
The average weekly earnings,the growth, fell.
It fell.
It's 3.4.
All right, not 4%, 3.4.
And why does that make adifference?
Because core CPI is 3.3.
Headline CPI is 2.5, 2.4,excuse me.
So when you take the 3.4 number, at best it's 1% real wage
(08:36):
growth.
That's not enough.
Not enough to keep consumerspending on discretionary items
strong.
There's nothing strong about it.
You want to say the economy'sstrong.
How about housing?
Housing's not strong?
What data are you looking atwhen you say the economy's
strong when housing is in thetoilet.
(08:59):
The 30-year mortgage rate,according to the Mortgage
Bankers Association weekly data,30-year mortgage rate over the
last two weeks excuse me, overthe last four weeks has risen 40
basis points.
It was going to take out 6% andnow it's all the way back above
6.5%.
As a result, the last two-weekapplications for mortgages the
last week fell 17% in a week ontop of the 5% gain from the
(09:22):
previous week.
These are the biggestback-to-back gains we've seen in
a week, on top of the fivepercent gain from the previous
week.
These are the biggestback-to-back gains we've seen in
a decade in mortgageapplications, way more than
anything during 2020 or 20,excuse me, except for the qe, um
, excuse me.
Rather, in 2015 was the lasttime you were at this level, at
this kind of decline, and thatwas as QE was ending after 2014
(09:44):
QE3.
So think about that.
The refinance index fell 26%for the week.
I mean that's amazing.
All right when we talk aboutthis dynamic.
All right, all of the Fed ratecut optimism is gone.
All right, all of the fed ratecut optimism is gone.
(10:06):
Let's talk about the rest of thehousing market because permits
housing permits, building, newbuilding permits down 5.7
percent year-over-year.
Housing starts down 0.7year-over-year and it's sticking
at a very low level.
I mean, you know, belowpandemic levels.
You know, uh, not belowpandemic.
We're heading back towardspandemic levels.
The uh number of uh, thepercent change, percent change
year over year in the homesunder construction fell 11.7,
(10:32):
while completions rose 14.6 butfell six percent for the month.
Now what does all that mathmumbo jumbo mean?
It means this we've justfinished building a lot of homes
because of the demand in allthe homes that were started two
years ago.
We have no new permits.
We have no new starts.
We have the number of homesunder construction plummeting
(10:53):
because we're completing them.
This means less constructionemployment in the very near
future.
How is the economy strong whenthe housing market is virtually
and the mortgage market isvirtually tanking again?
Why?
Because the Fed is restrictive,because they're still so high
relative to inflation with theirpolicy rate and now because of
(11:15):
a payroll number that shouldn'thave elicited this kind of
response.
It got the kind of responsethat was the Fed won't cut again
potentially this year.
It's not 100%.
Even odds they'll cut one moretime, close to 100%, but not
100%.
Let's talk about the bankearnings that came out this week
.
They were rip-roaring.
Morgan Stanley skyrocketed,right.
(11:36):
But the problem is and I sawsome really really stupid
comments on Twitter about howstrong the banks are because of
this number Frankly, it's notreally true.
These numbers, the revenuenumbers and the profitability
was good.
It was all because of arip-roaring stock market.
(11:56):
Over 100% of Bank of America'searnings growth came from three
things trading, interest, incomeand wealth management.
All right, and it was funnybecause the loan loss reserves
up Okay.
Unrealized losses oninvestments for banks Fed just
came out with a report is overhalf a trillion dollars.
(12:19):
Banks hold $4.4 trillion oftreasury and government agency
securities.
The standing losses right noware over half a trillion dollars
.
That's unrealized losses.
They have enough cash to coverit, but it knocks half of their
wipes out, half of their cash ontheir balance sheet, let alone
the loan loss reserves whichwent up to for credit cards
(12:42):
because of delinquency rates andthe failure rates and the
bankruptcies are up too.
All right, and what'sinteresting is Bank of America
said well, consumer spending wasup 3%.
The consumer is strong.
3%, that's the rate ofinflation and it's not consumer
spending, it's up, it's consumeruse of credit cards that Bank
of America has and they'respending more because of the
(13:03):
inflation, because it costs morefor everything.
The increase in credit cardbalances was exactly the same as
the inflation rate.
I mean, come on, man, that'snot strong.
Where's the strength there?
I mean seriously.
Well, let's talk about consumerloans.
All right, because the bankbalance sheets and there's other
(13:23):
forms of consumer loans.
So some of the numbers I'mgoing to give you are different.
Understand they're differentnumbers because they represent
different things.
But it's all about consumerloans.
The bank balance sheet,consumer loans, credit card,
revolving credit $1.9 trillionis up only three one-hundredths
(13:43):
of a percent since June and it'sup only 1.4 year over year.
You can see the slowdown.
The cocooning here is.
Here it's disinflation to themax.
That's not enough, and I'm notsaying it should be higher, but
trust me, I mean this is a bigproblem, but this is the path
we've chosen is to reflatethrough credit.
(14:10):
Right now we're disinflatingthe credit to the point of it
being almost deflation.
A credit crunch is the lastthing the Fed wants to see right
now.
Trust me on that one.
Let's talk about the consumercredit numbers from the Fed,
which includes stuff likefinance agencies and what do you
call them Savings, not savingsand loans, credit unions, stuff
like that?
Right, total consumer creditabove $5 trillion?
(14:31):
All right, it's up a trillionfrom a year ago.
Okay, in August of 2010, it was$2.5 trillion.
So that means in 14 years,you've doubled consumer credit,
doubled 2010,.
After the crisis, after QE,tarp, talf all the money they
(14:52):
printed, consumer credit jumpedin August of 2010 to $2.5
trillion 2.52.
That was a record high at thetime.
All right, in 14 years it'smore than doubled 5.097.
But let's go all the way backto August of 1971, when they
took the dollar off the goldstandard.
At that point, consumer creditwas 400 billion.
(15:17):
Check that 0.4 trillion.
So the so the first two and ahalf trillion was created in 41
years it took to create it andfrom that point forward, 14
years to create the next two anda half trillion.
All right, let's look at thetotal credit card numbers, right
, 1.357 now,1.357 trillion.
(15:40):
All right, it is up over thelast 52 weeks by over $50
billion.
It's been up by over $50billion on a rolling 12-month
basis for 138 consecutive weeks.
That's almost three years.
Think about that 138 weeks.
The constant change year overyear has been 50 billion, 50
(16:04):
billion, 50 billion.
50 billion Adds up every time138 weeks.
All right, the only other timesthat it's been above 50 billion
was five weeks in 2004 and 16weeks in 2008 into 2009, right
before the crisis A total of 21weeks in history, but the last
138 weeks it's been above 50billion.
(16:27):
Let's look at the interest ratespeople have paid.
All right, I'm going to go backMay of 2014,.
I'm going back 10 years In May.
Average interest on creditcards that were actually charged
accrued interest, becausethere's all kinds of different
measures of this that wereactually charged accrued
interest because there's allkinds of different measures of
this 16.82, and these numberscome from the Fed 2014, and
(16:49):
these are May numbers.
We're going back from May.
It's quarterly data that'sreported in the middle of the
quarter 16.82.
May of 2017, 12 points.
11,.
Excuse me, may of 2014 was11.82.
May of 2017, 12.7.
(17:11):
May of 2019, 15.1.
May of 2020,.
In the pandemic it actually fellto 14.5.
So four years ago it was 14.5.
2022, 15.1%.
May of 2023, 20.8%.
It rose 550 basis points whenthe Fed raised rates 450 basis
(17:33):
points.
So credit card rates went up bymore, so banks had to expand
their margins, let alone keepbase with the Fed Since then,
since May of a year ago 23.4.
It was 20.8 last year, it's23.4 now.
Okay, that's up from 11.8, 10years ago.
(17:53):
It is more than doubled in 10years as the consumer credit has
doubled.
The interest rate to borrow hasdoubled.
Banks are cleaning up.
Here's another one for you Acredit card, capital One.
You want to talk aboutbottom-feeding parasites?
Capital One credit cards Offeryou, if you have a lower credit
(18:15):
score, $500 credit and it's a23% rate.
I know someone who got thisoffer.
So you get the offer for $500of credit.
You don't have credit.
You want to build your credit.
It seems like a good deal.
You do it.
You say, look, 23%, that's alot, but I'll borrow and pay it
off every month and it'llimprove my credit.
The problem is it's $25 a monthfee, which over a 12-month
(18:39):
period means $300 in fees, whichis a 60% interest rate to hold
the card.
That should be illegal.
I'm sorry, that isbottom-feeding, parasitic to the
max.
Capital one here's the kicker.
You want to say the consumerbalance sheet is healthy.
You want to say the consumer isstrong?
(19:00):
I throw this one at you.
Total credit card debt 1.35trillion.
Personal savings 1.05.
Credit card debt is 300 billionmore than savings.
There's only one other timethat's been the case 2007 and
2008, right before the crash.
(19:20):
So no wonder, with the highrates and the huge amounts of
credit and all of this, that thedelinquency rates are
skyrocketing.
Fed data seriously delinquentabove 90 days 10.93% of credit
card holders are in delinquencyby over 90 days 10.93 versus 8.0
(19:45):
a year ago.
It's almost 11 versus 8 a yearago.
That's a massive increase.
I mean it's over 50% increase.
All right, let's take the 10.93and look back at 2008.
All right, we went from 8 to10.93.
That's the fastest accelerationon record.
All right.
(20:06):
When you take 2008, when it roseand it was a precursor to the
crisis, the third quarter of2008 was 9.4 delinquency.
Fourth quarter of 2008 got to10.2.
By the first quarter of 2009,it was 11.4.
It's almost to the level thatit was during when the crisis
started.
All right, and was already intofull swing by first quarter of
(20:30):
2009.
And if you remember that,because March of 2009 was the St
Paddy's monetary massacre whenthey introduced QE, tarp and
TALF, you're right there, man.
You're at crisis levels Newlydelinquent 9.05 versus 7.2 a
year ago, versus 1.4 in thethird quarter of 2021, when you
(20:51):
had forbearance and everything,the delinquency rate was 1.39.
Now it's 9.05.
Consider this the third quarterof 2007 was 9.29, pretty much
where it is now by the thirdquarter of 2009, it was 13.8.
The consumer balance sheet isnot healthy.
The consumer is not strong.
(21:12):
It's bull.
It's absolute bull.
Let's take retail sales.
Just came out Really.
Hey, everyone was all excited.
Retail sales stronger thanexpected for the month.
Right, strong is not the word1.7 year-over-year increase.
(21:32):
Even the CPI the lowest of theinflation rates at 2.4, you're
still negative on a real basis.
All of the increase in dollarterms is because of price
increases.
They don't measure that in theCPI, in the retail sales data.
Rather, all right, the retailsales have been negative.
(21:53):
Deflation in retail sales on areal basis 26 of the last 29
months and every single month in2024.
Let's talk about this numberbecause there's something fishy
going on here, just like therehas been in the labor market
number Seasonal adjustments Onan unadjusted basis.
(22:14):
Okay, last year the decline was36.8.
This year, on an unadjustedbasis, the decline was 56
billion.
So you went from 37 billionlast year to 56 billion this
year, yet somehow, miraculously,sales rose.
Let's talk about eating anddrinking establishments.
(22:38):
Why?
Because it's the ultimate indiscretionary spending.
You have more money, you feelhealthy, wealthy and wise.
You're going to go out and eatand drink, right.
If you're not, you're going tostay home.
That's why McDonald's is at arecord high and MGM and some of
the luxury item prices arebreaking down.
All right, eating and drinkingestablishments, unadjusted.
(22:58):
Last year fell by 1.58 inSeptember you know, it's kind of
end of summer, back to school,it normally falls.
It's the seasonal adjustmentthat needs to be made for the
data right.
Last year, unadjusted fell 1.58.
The adjusted number was up 1.63.
So the adjustment was exactly3.1 billion.
This year the adjustment was7.5 billion.
(23:21):
Last year's seasonal adjustmentwas $3 billion.
This year it's $7.5.
What makes this Septemberdifferent than last year Other
than, you know, hurricanes?
No, that's right, that wasOctober, because I heard someone
say that Unadjusted.
This year the decline is $7billion versus last year.
$1.5 billion, $7 billion, andyet the adjusted number is up
(23:46):
$0.5 billion, $550 million.
They fudge these numbers withthe seasonal adjustment.
Retail sales deflation let'stalk about without the price
adjustments, because the priceadjustments makes every number.
I'm going to give you deeper innegative territory
Discretionary items.
The only one that's up isclothing and it had been way
(24:07):
down, so it's a bounce back andit's all based on like two
months of strength, all right.
So, to whatever extent you knowpeople, people bought clothes
and they haven't bought clothesin a while.
Now they bought some clothesagain, all right, but every
other, every other discretionarycategory is down, outside of
online shopping, where theyear-over-year rate of change
has cut in half from 18 monthsago 7.1 still healthy down from
(24:32):
8.1 a month ago, not as healthy.
But every other discretionarysector sporting goods, books and
music down three and a halfpercent year-over-year.
Furniture down 2.3 percentyear-over-year.
Appliances down 4.6% year overyear.
Vehicle sales down just under1% year over year.
What's up?
Personal care, health careitems and food that's not strong
(24:57):
.
How's that strong?
We're buying food andtoothpaste, but we're not buying
sporting goods.
We're not buying books or music.
We're not buying furniture.
We're not buying electronics.
We're not buying appliances.
We're not buying books or music.
We're not buying furniture.
We're not buying electronics,we're not buying appliances.
We're not buying cars.
But the consumer's strongInflation is kind of the problem
, though, because I said here onthis program, I like saying
(25:17):
that I just think it's cool.
On this program.
We talked about inflation.
We called inflation all the way.
Go back and listen I don't haveto blow my own horn because
it's all there on the recordthat inflation would be high.
Then it would come down.
It would be energy, it would bebase effect, it would bottom.
It might even get below threeand then bottom and go back up.
Hello, it's exactly what'shappened and hello, it's rising
(25:38):
again.
The core rate rose this thispast week.
We saw the inflation numbersand maybe there's the end of
last week.
Uh, core rate 3.3, up from 3.2,I mean, versus a 4.75 expected
fed funds rate of the low end ofthe you know, fed funds uh
thing, uh range I mean nowyou're starting to talk about.
(25:59):
Maybe that's why they wouldn'tcut.
The headline rate, though, wasuh two, was uh 2.4, so 2.4
versus 4.75 feds, veryrestrictive still, okay, um, but
what's interesting about thisis that that this was all
gasoline, all right, it was allenergy.
Gas was down 15 in price yearover year.
(26:21):
Food 2.3 year over year, upfrom 2.1 had been below one.
Foods come back, and I'm goingto talk more about food in a
minute.
When you talk about where isthe inflation, it's in services,
service inflation is sticky,near 5%.
I mean more than double theFed's target range.
Service inflation X energy 4.7.
(26:42):
All right, shelter 4.9.
Rent 5.1.
Transportation services 8.5.
And that's up from 7.9 a monthago.
Medical care 3.6, up from 3.2.
Medical care 3.6.
That's way above the Fed'starget rate.
Everyone needs medical care.
All right, let's talk a littlebit about food, because food
(27:05):
five out of six grocerycategories is how they do it.
Five out of six were up.
The one that wasn't up wasunchanged.
None of them were down andwe've had five out of six down
the last couple of months.
This is a major shift in foodprices and it is critical to the
whole dynamic.
Protein it doesn't matterwhether you're a carnivore or a
(27:26):
vegetarian, you got, or apescatarian, you got screwed
here.
Okay, protein meaning meat,poultry, fish and eggs.
That's the category that theygive you all right, this the bls
gives us cpi to the bureau oflabor statistics.
Uh, meat, poultry, fish andeggs is one of the categories.
A 0.8 for the month, that's 10%annualized, and up 3.9 year
(27:47):
over year.
It's double the Fed's targetrate.
To get protein.
Can't live without protein.
You're a veggie?
Okay, fruits and vegetables a0.9 for the month.
That's 10% annualized.
I mean it's huge.
Then we start talking about newhighs in cattle, in ground beef
, in milk, in eggs, in chicken,in cocoa, in coffee, in OJ.
(28:09):
Even sugar is breaking out.
Now we start to get to thestrategy, because dollar down
means commodities up and all ofthis where the Fed is going to
acquiesce to save the consumer.
Because you have stagflationand energy is down big because a
year ago crude oil was $81.
Now it's hovering around $76,so it's still a negative base
(28:30):
effect.
Gasoline prices were down 5%.
The wholesale price reached$1.81, down 15% year over year.
But guess what?
Not all energy is negative anda lot of it's actually now
coming back, particularlynatural gas up 0.5% for the
month, 6% annualized, up 2% yearover year.
It's at the Fed's target,electricity 3.7, almost double
the Fed's target.
(28:50):
So inflation's not dead, theconsumer's not healthy.
And that leaves us with whatStagflation?
Throw in the fact our tradedeficit for goods is over $100
billion outside of four monthsin the pandemic.
That's a record trade deficit.
Our budget deficit another $1.9trillion this year.
The interest on the debt is $1trillion, over a trillion, and
(29:13):
they spent almost twice as muchas they took it in revenue.
It's insanity.
Twin Tower deficit is bad forthe dollar.
You also have the BRICS right.
These countries, like Brazil,like South Africa, like India,
for example right, india has 800billion in official FX reserves
, most of them dollars, most ofthem held in bonds.
(29:34):
They want to participate in theBRICS.
They got to liquidate dollars,take those dollars, sell bonds,
take the dollar proceeds and buygold to back their part of the
currency in the BRICS unit.
So this is why the dollar hasbeen strong, even though it
probably shouldn't be.
Why?
Because the Fed is not cuttingrates.
Other countries are Germaninflation just fell to 1.6.
(29:56):
Italian inflation is 0.7 yearover year.
So the differential between theUS two-year interest rate and
the German two-year interestrate just moved by 50 basis
points.
It had been 135 basis points,just went up to almost 2%.
You've got that kind ofmovement that's going to move
money into dollars.
This has lifted the dollar.
The Bank of Canada is going tocut rates again.
(30:18):
Inflation just fell below theirtarget.
New Zealand is going to cutjust cut.
Bank of England inflation justfell below their target.
They're going to cut again.
The Europeans just cut ratesand the Fed's standing still and
the market's not pricing asmuch rate cuts as they had been.
This is holding the dollar up,which intensifies kind of the
stag part of the stagflation.
But at the end of the day theFed will be forced to acquiesce
(30:42):
to higher inflation to protectthe consumer, to protect growth.
We have too much debt.
It's a debt.
Deflation is the bigger riskthan an inflation.
We need that growth and wedon't have it.
You can't keep paying down thedebt.
You see it in the delinquencyrates already.
This is bad man.
You need the growth and centralbanks will choose to reflate
(31:03):
every single time because theythink they have a beat on
inflation, as Powell just haskind of proven to himself at any
rate.
So what do we do?
We look for the dollar to turndown.
It's reached $103.50-ish.
That was our upside target fora countertrend rally.
You get below $99.50,.
The dollar's going to $90 ormuch lower.
This is a big picture.
(31:23):
It goes all the way back to the70s.
The or much lower.
This is a big picture.
It goes all the way back to the70s.
The purchasing power of thedollar right now, relative to
1971, we went up the goldstandard relative to an ounce of
gold is 3.9 cents.
Your dollar in 1971 would buyyou what 3.9 cents would buy you
today?
That's going to continue.
That's a secular, multi-decadetrend.
That's going to continue.
Commodities the place to be.
(31:44):
We've talked about uranium.
Uranium's coming back.
You see all these companies.
We talked about the need fornuclear energy.
It's more efficient and cleanerthan solar or wind.
It will be big and it is theNLR, the nuclear, the world
nuclear energy ETF, is our toppick.
The URA also in the mix.
We want to be buying commoditiesRight now.
We're involved in the mix.
We want to be buyingcommodities Right now.
(32:06):
We're involved in the ags, likewe just said, with cocoa and
coffee and sugar and cotton.
Even so, that's the and OJ.
By the way, you know you havethe lowest orange crop in
Florida since 1933.
All right.
Even worse is grapefruit Allright.
So you're going to be payinghigher prices for that.
Oj is at record highs, gotalmost to $6 in the wholesale
(32:28):
market.
The DBA is the ETF for that.
We're also looking, of course,at the base metals Interesting
stuff.
I won't talk too much aboutthat, but really, you know we've
been all over the preciousmetals.
You know we've been all overgold and silver and especially
the mining shares there.
I wrote out to my clients onThursday night.
Silver is about to explode,make a big move.
(32:50):
I did a interview with PeterGrandich, the former Wall Street
whiz kid, on Thursday, alsotalking up silver.
Friday silver was up $2.
It's at a new high.
It's not a question if it'sgoing to 40, it's a question of
how quickly it's going to 40.
And we're going to see that too.
In terms of my portfolioplaybook that we send out to our
(33:11):
clients, we have been heavilyallocated to the silver and gold
mining shares and to thenuclear sector, and that has
really paid off as opposed toyou know.
Hey, look at this.
Gold is breaking out againstthe XLK, which is the Infotech
ETF.
And I would throw in one lastthought Bitcoin.
Bitcoin broke out this week.
(33:31):
We got long just above 66,000.
That was our key upside pivot.
If it gets above 70,800, basisthe spot futures contract,
that's a major breakout inBitcoin and a measured move
would put Bitcoin at 95,000.
That could happen soon.
Silver at $40, if not $47 inthe next three to six to 12
(33:54):
months and Bitcoin to 95,000 inthe medium term as well.
Those are the things you canbank on.
If you want some of my research, email me at sales at
weldononlinecom.
Follow me on Twitter at WeldonLive.
Follow the podcast at moneyunderscore podcast and follow me
(34:15):
on YouTube Gregory underscoreWeldon.
Thanks for listening.
We'll be back at you withepisode 13 next month.
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