November 19, 2024 • 28 mins
In Episode One of Season Three of Money, Markets & New Age Investing Greg Weldon defines the new "D.E.I." for the next four years in the US under Donald Trump.
The new D.E.I. is...
...DEBT
...EASY-MONEY
...INFLATION
Hear all about the NEW AGE "trends" and find out what Greg envisions for the markets over the next few months, in Season Three, Episode One, of Money, Markets & New Age Investing!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hi, greg Weldon here and I'm your host of Money
Markets and New Age Investing,and this is Season 3.
Welcome to Season 3, episode 1.
We're going to start off bygiving you the new DEI.
Dei is dead.
Long live the new DEI.
(00:20):
The king is dead.
Long live the new king DEI.
What does it mean now?
Now, it means debt easing andinflation.
Dei it's the new DEI.
Public debt now $35.97 trillionas of November 15th, just shy of
$36 trillion.
(00:41):
I mean, you know, pretty muchunbelievable.
When you take the Octoberbudget data that was just
released, first month of the newfiscal year 2025, spending was
$584 billion, revenue, $327billion.
Essentially, you spent $600,you took in $300.
(01:02):
You took in 300.
Spending was 178.5% of revenue,180% of revenue, almost twice
(01:26):
of revenue.
In other words, 44 shy of fourtimes the October of a year ago.
Deficit of $66 billion Fourtimes the deficit of a year ago.
October, all right.
October, all right.
Now, in terms of that $257billion in debt, which is
(01:48):
basically public debt, it wasfinanced by borrowing from the
public the means of financewithin the budget numbers.
This is the terminology themeans of finance, borrowing from
the public.
So it's public borrowing thatwe borrow from the public, do we
start to see how kind ofbackwards this is.
But the extent to which $257billion was financed by
(02:13):
borrowing $262 billion, $5billion more Last fiscal year,
that total through the 12-monthperiod was $140 billion, just
shy of $140 billion that justwas borrowed that never found a
home.
And then all of a sudden wefind out there was $140 billion
spent on moving illegalimmigrants around the country.
So again, fishy things going onthere, let alone the complete
(02:37):
recklessness andirresponsibility of the spending
.
All right now let's take thatthat 35.97 trillion national
debt, public debt of thatborrowed from the public is 28.4
trillion.
There's another 7.9 trillionheld by foreigners, mostly
(02:58):
central banks, foreign officialaccounts.
And then you have, though stillroughly $7 trillion that the
Fed holds.
It adds up to more than $36trillion because $36 trillion is
like the marketable debt.
There's actually off-book debt.
That makes it even higher.
Then you throw in household debt.
New Fed report from New YorkFed just came out.
Household debt just shy of $18trillion.
(03:22):
Mortgages are $12.6 trillion ofthat.
Consumer debt over $5 trillionfor four months in a row now.
Of consumer debt, $1.17 trillionis consumer credit.
I mean credit card debt, excuseme, credit card debt.
Interest rates are now 23.4 onaverage.
We talked about that in thelast episode.
(03:44):
But what's interesting aboutcredit card debt?
At 1.17 trillion?
It's greater than personalsavings, just credit card debt,
which is barely 20% of totalconsumer debt.
That doesn't include mortgages.
Let's see where we're goingwith this.
Auto loan debt 1.64.
Also, itself alone greater byhalf a trillion dollars than
(04:10):
personal savings.
And when you take the labormarket, which we're not going to
talk about really today, otherthan to note the fact that again
, even though the average weeklyearnings has gotten to 4, 3.6
to 4%, you're still relative toa 2.6 headline and 3.3 core CPI,
(04:31):
at best 1% real basis growth inincome.
It's not enough to supportspending when inflation is what
it is and a lot of things are alot higher.
You could make a case that ifyou take service inflation, it's
four and a half of things are alot higher.
You could make a case that ifyou take service inflation, it's
four and a half or higher.
So no wonder the consumer'schoking, no wonder delinquencies
(04:51):
are starting to rise and nowlate payments on mortgages
starting to rise.
You have a total of $55trillion in public and consumer
and household debt in public andconsumer and household debt.
Throw in, conservatively, $11trillion of corporate,
commercial and industrial debt.
(05:12):
That's a total of $65 trillion.
That's almost $200,000 a person, every person from the
six-month-old to the one-day-oldto the 99-year-old 330 million
people I used to calculate.
And at the same time now is theconsumer choking with debt that
(05:32):
has reached you know kind ofcrisis levels on a ratio
relative to other things, letalone the transfer payments, in
other words, government handoutsstill above $4 trillion and
rising again, making up almost25% of personal income.
But now the senior loan officersurvey that just came out this
(05:53):
week last week Rather, I'mthinking.
It's the weekend still.
It's actually Tuesday already.
It's one long work day.
I work all weekend, goddamn.
Thank God.
I love what I do, but you haveto slew the senior loan officer
survey show.
They're tightening standards onconsumer loans, all right, and
at the same time, this past weekwe got the commercial bank
(06:16):
balance sheet data from the Fedthat showed loans actually
contracted by $20 billion $12billion, of which 19.3 total
$12.2 billion was credit cardloans.
I haven't seen a double-digitbillion per week credit card
loan balance decline in a longtime.
(06:36):
I'm not saying there hasn'tbeen one, but I don't remember
seeing one in a long time.
Not only that, there was a $0.7billion decline in automobile
loan balances at commercialbanks, so a big decline in loans
.
This is a credit contractiononly one week, but still
noticeable 65% of which wascredit card loan contraction.
The rejection rates on creditcards has skyrocketed.
(06:59):
So not only are they tighteningstandards, they're actually
applying those standardsvigorously.
The rejection rates on creditcard loans this is from the Fed
just rose to 22%.
That's up from two years ago.
18% October over October, 22%now 18%.
Rejection rates on peopleasking to have their limits
(07:23):
increased skyrocketed to 45%.
Almost half of people that wanttheir limits increased are
getting rejected by the banks.
That's up from 32% just a yearago.
So that's a massive, you knowone-third increase.
All right when you start totalk about the rejections on
auto loans 14%, up from 6% twoyears ago.
(07:46):
And now mortgages higherrejections on mortgages really
noticeable 20.7% in October.
That's up 8.6 percentage pointsfrom a year ago when it was
12.1.
From 12.1 rejections onmortgages to 21%, 12 to 21.
(08:07):
We're talking about now newapplications for new cards has
fallen dramatically.
This is a credit crunch becausethe consumer is choking because
you don't have any income.
Growth and inflation remainssticky and you know to whatever
(08:28):
extent it's reflected in retailsales continue 27 of 30 months.
The headline number hasdeflated on a year-over-year
basis, this month at 2.8 versus2.6, I used CPI.
Real growth was only 0.2 versusthe core rate.
(08:48):
It was minus a half of 1%, allright, and retail sales were up
2.8 billion for the month, whichis a small monthly increase.
By the way, I don't know whyeveryone got so excited.
This was a strong number Again,it wasn't 2.11 billion.
Of the $2.8 billion totalincrease in retail sales for the
month was automobile sales,which were really weak.
Last month, ex-auto retailsales only rose $700 million for
(09:14):
the month On a $700 billion permonth number.
That's terrible, terrible,terrible.
It's not only not good, it'sawful.
Out of 21 indexes they used tobreak down industry sectors in
retail sales, only four hadyear-over-year rates above the
(09:37):
core rate of 3.3.
Vehicles, miscellaneous storeretailers, online shopping,
eating or drinkingestablishments.
The other 81% 17 of 21, weredown, deflating on a real
inflation-adjusted basis.
Keep in mind retail sales doesnot consider inflation, it just
(09:57):
is the pure dollar number.
So if you have to spend more,this is a case of people
spending more but actuallybuying less stuff.
That's what's happening here.
We've shown this month andmonth again to our institutional
clients in our daily research.
So let's talk about some ofthese numbers.
I mean, you know, just sportinggoods, books and music down 6%
(10:20):
year over year.
Electronics and appliances down4.9% year over year.
Furniture down 0.9,.
Clothes up only 0.3, andvehicles up only 0.9%
year-over-year Furniture down0.9%.
Clothes up only 0.3% andvehicles up only 0.8%.
Eating and drinkingestablishments seem strong at up
1.7% year-over-year, but that'sreally weak compared to what
it's been and it shows thatwhere the rubber hits the road,
(10:45):
so to speak, on discretionaryspending, it's eating and
drinking out.
Case closed.
For me it always has been Allright.
Online shopping still thestrongest at 4.4, which seems
strong, and it is Not weak.
But compared to consistentdouble-digit gains for the last
several years, month in andmonth out, 4.4 is subpar for
(11:07):
that sector.
It just is.
So let's look at it this wayeight out of the nine major
components in retail sales arenegative, excuse me.
Seven out of nine, excuse me,seven out of nine of the major
components are either negativeor up by less than one percent.
Not strong at all.
Consumers choking, and it'svery obvious.
(11:27):
Within that same context CPIinflation, I mean the service
sector X energy of 4.8% yearover year.
All 11 indexes in the servicesector are above 3% year over
year and 8 out of 11 are above4.5%.
It's basically, you could say,service sector inflation remains
(11:52):
5%.
That's more than double theFed's target rate.
So why then, is it strange thatdelinquencies are rising?
And let me throw you a stat onthe back end of this, in terms
of delinquencies on automobileloans, normally when you see a
problem, it's the 18-year-oldsto 39-year-olds that have issues
(12:13):
.
These are people early credit,not as high-paying job, not far
along in their career, not asestablished financially who
start to become late on theirauto loan payments.
This time around it's acrossevery age sector, and the older
age groups are catching up.
The 40 to 70 sect now isinvolved.
(12:33):
Every one of these is movinghigher at a level we haven't
seen since 2008 into early 2009.
I mean at the peak of thecrisis.
What's interesting here is the50 to 59-year-olds and the 60 to
69-year-olds.
The 50 to 59-year-olds and the60 to 69-year-olds both of those
(12:53):
sectors have gone fromdelinquency rates below one to
well above two in just the lastcouple months.
That's a big shiftpsychologically and just from a
statistical standpoint.
But to say, hey, donald Trumpwon the election.
And while I would say lessgovernment is always better, one
side was clearly about lessgovernment, one side clearly
wasn't.
(13:13):
So you know my choice.
I'm not a fan of really any ofthese politicians per se because
they're not unifying, but maybeunity is just not there to be
had anymore.
But beyond that, what you dohave is a rush of sentiment of
(13:33):
bullish exuberance.
Now I'm not going to go AlanGreenspan on this market and say
it's irrational exuberance.
I will say it's illogicalexuberance.
And why do I say that?
Because Trump isn't even inoffice yet.
Number one, number two policieswill take time to play out.
We're not even going to startyet with the policies themselves
(13:57):
, aka tariffs.
But let's just say this is atime frame before anything will
actually happen, and we needstuff to happen now.
The consumer is choking.
Now.
The consumer is still 70% ofthe economy and the consumer is
lagging the stock market likeI've never seen before, and that
correlation is as tight asanything usually gets.
(14:18):
And the consumer is the leaderup and down at bottoms and tops,
and right now it's a bignegative.
We'll talk more about that interms of tech, having been that
leader in a second.
But the point is the consumer ischoking now and fed rate policy
is tight because they're stillwell above inflation, with the
fed funds rate all right abovemore than 100 base points above,
(14:40):
which means they are tight.
Policy is still tight on rates.
Quantitative policy is stillvery tight.
With 800, and I think it's 897billion is now the rolling
52-week net change in the Fed'sbalance sheet.
It keeps hitting new lows everyweek.
So quantitative policy is tight.
Rate policy is tight.
Inflation has started to pick upagain and let's not forget in
(15:05):
case you didn't hear, mostpeople haven't, because it's not
mainstream news that the us hasdropped since the end of june
into july into one of the worstdroughts we've seen in our
lifetime.
Not quite as bad as the droughttwo was it two, three years
summers ago but it's bad andit's gotten bad very quickly and
we've shifted from uh, la ninato el nino and this is not the
(15:26):
kind of thing that you have oneor the other.
It's usually there very quicklyand we've shifted from La Nina
to El Nino and this is not thekind of thing that you have one
or the other.
It's usually there's one andthere's a period of time the
other one develops.
You see, it come.
No, this is bing bang, boomright in a row.
All right.
According to NOAA, as of the endof I think this was November
15th 52% of the 48 US states,52% of the landmass, is in a
(15:51):
drought, a moderate droughtthat's up from 11% in June.
52% over half the country hasexperienced a moderate drought,
up from 11% in June.
22% of the country hasexperienced a severe drought.
22% of the country hasexperienced a severe drought
Severe 22%.
That's up from 3% in June.
From 3% to 22%.
(16:13):
In a matter of what do we got?
July, august, september,october four months In terms of
there's no issue with dryness.
Only 12% of the country now,versus 71% in June.
So you can see how it shiftedfrom June.
Not only that, you have thisissue around the world and this
(16:35):
is going to affect this nextcrop here in South America.
All right, in terms of thingslike soybeans and corn and some
of the other things Already atnear or just coming off of new
record highs.
Many food groups andcommodities cocoa, coffee, oj,
pork, beef, milk, cheese, butterthe CPI in food has bottomed at
negative territory.
You knew it was going to happenand it's coming back fairly
(16:55):
strongly.
Five out of six components inthe grocery groups were up in
the CPI and some dramatically so, some two of them at double
digit annualized rates for themonth, and the one that wasn't
up was unchanged.
It wasn't down and this is abig flip from four or five that
have been deflating every monthto now five inflating again and
(17:16):
the headline food CPI going up.
So this brings us back to theFed.
We've got a credit crunch.
We've got a consumer that'schoking.
We have Fed policy that's tight.
We have a president who wantsto come.
We don't have time.
They need to be a neutral nowand they're not.
What is neutral?
(17:36):
First of all, is it relative toinflation?
You could say with 3.3inflation, that might mean four
and a quarter is neutral.
You would say with 2.6%inflation, neutral, you could
get away with 350, 375.
The market is pricing thelatter 350 to 375.
But that's for the end of nextyear.
We don't have until December of2025 to see that.
(17:57):
So in the meantime, asinflation starts to rise again
and gosh forbid energy getsloose, because it's the only
reason that you are not seeing abigger picture inflation
problem already.
If energy starts to perk up andwatch natural gas, by the way,
I think that that's bottom thencould give us some year over
year vig.
You're going to get furtherstagnation in the underlying
(18:19):
economy.
The consumer All right, andthat, with higher inflation,
means stagflation.
Prepare for that kind ofoutcome.
And then the question becomesis it a credit crunch?
And I wouldn't have said yestwo months ago.
But now we're seeing signs ofthis.
And I go back to what I wrote in2006 in my book Gold Trading
(18:41):
Boot Camp.
I wrote in that book ahead of2008.
We saw the consumer, we saw thehousing bubble, we saw all of
that coming.
I wrote about this two yearsbefore it happened, three years
before it happened.
In the context of that, one ofmy quotes that I like to
continue to use because it'smore applicable now than it was
then, it was true then and it'strue now.
(19:03):
And I remember going on CNBC topromote the book with Joe
Kernan and Mark Haynes anddiscussing this and saying that
the Fed would be forced tomonetize US Treasury debt by
buying bonds, printing money todo it to bail out the consumer
and to bail out the housingorgan.
And they looked at me and it'sfunny, joe Kernan literally got
(19:25):
off the air and I'm back in thegreen room and he's on the air
and he goes wow, we've seen alot of nut jobs on this channel.
And he called me a nut job onnational television.
And of course, two years laterI saw him and had a little
discussion with him about howright I was and how uncool it
was to call me a nutjob onnational TV.
But at any rate, the quote iswhen peering into a debt
(19:48):
deflation abyss, monetaryofficialdom will choose to
reflate at all costs every time.
Now Jerome Powell has given usthis mantra that we know how to
fight inflation.
We have the Paul Volckerplaybook.
He just enacted it, seeminglysuccessful.
The jury's out on that.
I'm not ready to say that.
(20:09):
But you could make that casethat the tightening has done
enough to help inflation comedown in the context of the
natural decline that would havecome anyway from a mathematical
year-over-year base effectperspective.
But when it comes to this andyou're talking about a potential
credit crunch, you willacquiesce to higher inflation to
(20:32):
circumvent the worst-casescenario.
It's a debt deflation.
Now what's interesting is thecommentary from Powell and how
that relates back to PaulVolcker in 1978.
And Powell uses the exact samephrases sometimes.
It's really amazing to comparethe two.
Now, what's interesting backthen is Volcker said the last
thing we want is a creditcontraction.
The difference is that peoplethat I've heard people say this,
(20:56):
and I'm not trying to refutethe feel-good factor, I'm not
trying to refute the positivitythat we have as a result of this
election.
Having said that, let's berealistic.
Okay, this whole, like Reaganismrenewal, this resurrection,
this revival, this whole youknow, new deal, so to speak.
Reagan didn't have debt.
(21:16):
He wasn't saddled with so muchdebt that he could barely move.
This is why you had a 40-yeardowntrend that began pretty much
with Reagan in 1982, with PaulVolcker and Ronald Reagan, where
you had the downtrend ininflation and interest rates
that just ended with thepandemic.
(21:37):
You already have the negativerate doesn't work.
Experiment failing in Europe.
So we know there are limits towhat you can do on the downside.
This is the whole 2018 whitepapers around.
How do we ease policy withrates so low already when we
need to?
This has always been a concernand thank God for whatever
(21:58):
extent the Fed has gotten backinterest rate power to use when
they're going to need it andthey're going to need it because
you have this trend over, whichmeans you're going to be
acquiescing to higher rates ofinflation to save the consumer,
to save the economy from goinginto debt deflation.
Now I'm not saying you're on,you know, on the cliff, looking
into the abyss yet, but, man,you're awfully close.
(22:21):
And the thing that is kind ofleft out here is stocks and what
happens.
People are piling in and Iremember 82.
I remember the S&P was in itsinfancy of trading.
People were kind of like whatis this a stock index?
I mean, it was really esotericback then.
It's really amazing to thinkabout it compared to how
sophisticated everything is now.
(22:41):
But the bottom line is this isnot 1982.
All right, why?
Because, for one thing, fixedincome now means income.
Money markets are yielding 4%and up and have record inflow
and record amounts of money heldin them.
Now you're eventually going towant to release that money into
the stock market, which is whypeople are kind of surprised
(23:01):
that hasn't happened in the lasttwo weeks.
The issue here is I don't thinkpeople trust the market.
I sure don't.
Crypto got a nice boost out ofthat.
You remember, right here I saidyou know you take a measured
move and get above $66,000.
It's's going to 99,140.
There you go, all right, goldheld above 2,500.
Silver's held above $30.
(23:23):
And what's the biggest Trumptrade that maybe sustains out
here?
It's the higher dollar, becauseof kind of higher interest
rates and because of potentialtariffs, which would be terrible
for the dollar and would unwindthe dollar down the road, and
that's a whole nother story.
That's another podcast three,four times down the road.
But a higher dollar is one ofthe worst things for the US
(23:47):
stock market.
The correlation is so tight itwould blow your mind it's the
most reliable tight historicallygoes far back correlation of
anything negatively correlatedhigher dollar, lower stocks,
lower dollar, higher stocks.
It's that simple.
And right now the dollar israllying, breaking out in a
fairly significant longer termdynamic.
(24:08):
So something's got to give hereand I can't help but think it's
the stock market.
And then you say to yourselfwell, you know what's the
leadership going to be, what'sthe engine of economic growth
here in the US?
I mean, well, ai has been theengine of asset price growth for
stocks, but I have saidrepeatedly here that you are two
(24:30):
steps away from that being.
You know all in consumerproducts that you have sales,
that you have teams, that youhave an infrastructure built out
to sell products that arespecific to this, as opposed to
the chips and the computingpower and all the kinds of
things you might need and theenergy requirements and all the
other things where maybe we gota half a step to a step ahead of
ourselves here with AI.
(24:50):
Number one, all right, we knowthat it's not consumer-led, even
the XLY, which has ralliednicely off the Trump trade.
Why?
Because 40% of the XLY is Teslaand Amazon.
You want to pick two stocksthat are going to benefit from a
Trump win and the fact thatonline sales is the only thing
in retail sales that's remainingbuoyant.
(25:10):
You're talking about Amazon andTesla.
So the XLY has kind of beencompromised as a reflection of
the consumer versus the XRT,which is a much broader based
retail store index of stocksthat is falling and breaking
down against the S&P 500.
The consumer is not a leaderhere and the consumer needs to
(25:31):
be a leader.
Now, okay, is AI going to makeup the difference?
Well, it has.
The problem is the front end ofthe pipeline in chips is
already breaking down.
All right, the XSD now all of asudden joining the party and
threatening to break down here,that's the S&P Semiconductor
Index.
The XLK, which had been againstthe S&P 500, an upside leader
(25:56):
this entire time for the lasttwo weeks, has failed to confirm
this move in the S&P.
It's on wind, it's on fumes,it's on whatever is blowing this
thing to the upside.
It doesn't really havesustainability, not right now.
You don't have an upside leader.
Even NVIDIA looks very toppyhere, really toppy pattern.
(26:19):
It looks like it's left hangingout to dry.
It kind of reminds me.
And when you look at Europe too,and the whole election around
Europe with Trump and potentialtrade and potential currency,
and then this whole thing withRussia, european markets are
breaking down and I have saideither Europe or China, which
also continues to suffer,stimulus wasn't enough.
Either one of those areasEurope, the semiconductors here
(26:43):
in the US or China could becomea catalyst for a bigger picture
correction.
These markets are technicallyset up for it.
They are stretched to the maxand that is what this is all
about.
Okay, it's all about the newDEI, debt easing and inflation.
You need to keep pace with theinflation.
It's going to becomeincreasingly difficult.
(27:05):
Passive investments in stocksnot going to be what it's been
since 1982.
Everything has changed and inthat context, you're going to
have to again look to do a lotmore things differently, be a
lot more proactive and be in alot more things differently.
Be a lot more proactive and bein a lot more different
opportunities of differentmarkets per se, and I think that
the rally in Bitcoin is a goodexample.
(27:26):
I'm not a Bitcoin lover, butI'll tell you what.
In a case where you have allthese currencies that are under
pressure and you might havetariffs and you might have
places where liquidity becomesan issue, not everyone's going
to run out and buy bullion.
Then where are you going to putit A lot easier to have a phone
and an account and to buycrypto?
So that's one of the reasonsthat I continue to like Bitcoin
(27:48):
and I do like kind of the actiondown here on this corrective
move in gold and silver.
At the meantime, I think thestock market here looks very
vulnerable.
Keep pace with us.
Follow me on Twitter atWeldonLive.
W-e-l-d-o-n.
Weldonlive.
The product that we put out iscalled the Global Macro Strategy
Report.
That's also on our Twitter pageunder WeldonLive.
(28:12):
I'm on YouTube as user Gregoryunderscore Weldon, youtube as
user Gregory underscore Weldon.
Certainly follow the podcast onTwitter, that's, at money
underscore podcast, and then,you know, check us out.
We like to post some charts andsome cool articles and anything
(28:34):
that we feel might be ofinterest in accomplishing our
goal here, which is to help kindof the you know, the not
professional audience out thereto do what they need to do here,
to keep pace and to stay out ofharm's way.
That's it, episode number oneof season three in the books.
Join me next time for the nextepisode of Money Markets and New
Age Investing.
Hi, greg Weldon here and I'm your host of Money
Markets and New Age Investing,and this is Season 3.
Welcome to Season 3, episode 1.
We're going to start off bygiving you the new DEI.
Dei is dead.
Long live the new DEI.
(00:20):
The king is dead.
Long live the new king DEI.
What does it mean now?
Now, it means debt easing andinflation.
Dei it's the new DEI.
Public debt now $35.97 trillionas of November 15th, just shy of
$36 trillion.
(00:41):
I mean, you know, pretty muchunbelievable.
When you take the Octoberbudget data that was just
released, first month of the newfiscal year 2025, spending was
$584 billion, revenue, $327billion.
Essentially, you spent $600,you took in $300.
(01:02):
You took in 300.
Spending was 178.5% of revenue,180% of revenue, almost twice
(01:26):
of revenue.
In other words, 44 shy of fourtimes the October of a year ago.
Deficit of $66 billion Fourtimes the deficit of a year ago.
October, all right.
October, all right.
Now, in terms of that $257billion in debt, which is
(01:48):
basically public debt, it wasfinanced by borrowing from the
public the means of financewithin the budget numbers.
This is the terminology themeans of finance, borrowing from
the public.
So it's public borrowing thatwe borrow from the public, do we
start to see how kind ofbackwards this is.
But the extent to which $257billion was financed by
(02:13):
borrowing $262 billion, $5billion more Last fiscal year,
that total through the 12-monthperiod was $140 billion, just
shy of $140 billion that justwas borrowed that never found a
home.
And then all of a sudden wefind out there was $140 billion
spent on moving illegalimmigrants around the country.
So again, fishy things going onthere, let alone the complete
(02:37):
recklessness andirresponsibility of the spending
.
All right now let's take thatthat 35.97 trillion national
debt, public debt of thatborrowed from the public is 28.4
trillion.
There's another 7.9 trillionheld by foreigners, mostly
(02:58):
central banks, foreign officialaccounts.
And then you have, though stillroughly $7 trillion that the
Fed holds.
It adds up to more than $36trillion because $36 trillion is
like the marketable debt.
There's actually off-book debt.
That makes it even higher.
Then you throw in household debt.
New Fed report from New YorkFed just came out.
Household debt just shy of $18trillion.
(03:22):
Mortgages are $12.6 trillion ofthat.
Consumer debt over $5 trillionfor four months in a row now.
Of consumer debt, $1.17 trillionis consumer credit.
I mean credit card debt, excuseme, credit card debt.
Interest rates are now 23.4 onaverage.
We talked about that in thelast episode.
(03:44):
But what's interesting aboutcredit card debt?
At 1.17 trillion?
It's greater than personalsavings, just credit card debt,
which is barely 20% of totalconsumer debt.
That doesn't include mortgages.
Let's see where we're goingwith this.
Auto loan debt 1.64.
Also, itself alone greater byhalf a trillion dollars than
(04:10):
personal savings.
And when you take the labormarket, which we're not going to
talk about really today, otherthan to note the fact that again
, even though the average weeklyearnings has gotten to 4, 3.6
to 4%, you're still relative toa 2.6 headline and 3.3 core CPI,
(04:31):
at best 1% real basis growth inincome.
It's not enough to supportspending when inflation is what
it is and a lot of things are alot higher.
You could make a case that ifyou take service inflation, it's
four and a half of things are alot higher.
You could make a case that ifyou take service inflation, it's
four and a half or higher.
So no wonder the consumer'schoking, no wonder delinquencies
(04:51):
are starting to rise and nowlate payments on mortgages
starting to rise.
You have a total of $55trillion in public and consumer
and household debt in public andconsumer and household debt.
Throw in, conservatively, $11trillion of corporate,
commercial and industrial debt.
(05:12):
That's a total of $65 trillion.
That's almost $200,000 a person, every person from the
six-month-old to the one-day-oldto the 99-year-old 330 million
people I used to calculate.
And at the same time now is theconsumer choking with debt that
(05:32):
has reached you know kind ofcrisis levels on a ratio
relative to other things, letalone the transfer payments, in
other words, government handoutsstill above $4 trillion and
rising again, making up almost25% of personal income.
But now the senior loan officersurvey that just came out this
(05:53):
week last week Rather, I'mthinking.
It's the weekend still.
It's actually Tuesday already.
It's one long work day.
I work all weekend, goddamn.
Thank God.
I love what I do, but you haveto slew the senior loan officer
survey show.
They're tightening standards onconsumer loans, all right, and
at the same time, this past weekwe got the commercial bank
(06:16):
balance sheet data from the Fedthat showed loans actually
contracted by $20 billion $12billion, of which 19.3 total
$12.2 billion was credit cardloans.
I haven't seen a double-digitbillion per week credit card
loan balance decline in a longtime.
(06:36):
I'm not saying there hasn'tbeen one, but I don't remember
seeing one in a long time.
Not only that, there was a $0.7billion decline in automobile
loan balances at commercialbanks, so a big decline in loans
.
This is a credit contractiononly one week, but still
noticeable 65% of which wascredit card loan contraction.
The rejection rates on creditcards has skyrocketed.
(06:59):
So not only are they tighteningstandards, they're actually
applying those standardsvigorously.
The rejection rates on creditcard loans this is from the Fed
just rose to 22%.
That's up from two years ago.
18% October over October, 22%now 18%.
Rejection rates on peopleasking to have their limits
(07:23):
increased skyrocketed to 45%.
Almost half of people that wanttheir limits increased are
getting rejected by the banks.
That's up from 32% just a yearago.
So that's a massive, you knowone-third increase.
All right when you start totalk about the rejections on
auto loans 14%, up from 6% twoyears ago.
(07:46):
And now mortgages higherrejections on mortgages really
noticeable 20.7% in October.
That's up 8.6 percentage pointsfrom a year ago when it was
12.1.
From 12.1 rejections onmortgages to 21%, 12 to 21.
(08:07):
We're talking about now newapplications for new cards has
fallen dramatically.
This is a credit crunch becausethe consumer is choking because
you don't have any income.
Growth and inflation remainssticky and you know to whatever
(08:28):
extent it's reflected in retailsales continue 27 of 30 months.
The headline number hasdeflated on a year-over-year
basis, this month at 2.8 versus2.6, I used CPI.
Real growth was only 0.2 versusthe core rate.
(08:48):
It was minus a half of 1%, allright, and retail sales were up
2.8 billion for the month, whichis a small monthly increase.
By the way, I don't know whyeveryone got so excited.
This was a strong number Again,it wasn't 2.11 billion.
Of the $2.8 billion totalincrease in retail sales for the
month was automobile sales,which were really weak.
Last month, ex-auto retailsales only rose $700 million for
(09:14):
the month On a $700 billion permonth number.
That's terrible, terrible,terrible.
It's not only not good, it'sawful.
Out of 21 indexes they used tobreak down industry sectors in
retail sales, only four hadyear-over-year rates above the
(09:37):
core rate of 3.3.
Vehicles, miscellaneous storeretailers, online shopping,
eating or drinkingestablishments.
The other 81% 17 of 21, weredown, deflating on a real
inflation-adjusted basis.
Keep in mind retail sales doesnot consider inflation, it just
(09:57):
is the pure dollar number.
So if you have to spend more,this is a case of people
spending more but actuallybuying less stuff.
That's what's happening here.
We've shown this month andmonth again to our institutional
clients in our daily research.
So let's talk about some ofthese numbers.
I mean, you know, just sportinggoods, books and music down 6%
(10:20):
year over year.
Electronics and appliances down4.9% year over year.
Furniture down 0.9,.
Clothes up only 0.3, andvehicles up only 0.9%
year-over-year Furniture down0.9%.
Clothes up only 0.3% andvehicles up only 0.8%.
Eating and drinkingestablishments seem strong at up
1.7% year-over-year, but that'sreally weak compared to what
it's been and it shows thatwhere the rubber hits the road,
(10:45):
so to speak, on discretionaryspending, it's eating and
drinking out.
Case closed.
For me it always has been Allright.
Online shopping still thestrongest at 4.4, which seems
strong, and it is Not weak.
But compared to consistentdouble-digit gains for the last
several years, month in andmonth out, 4.4 is subpar for
(11:07):
that sector.
It just is.
So let's look at it this wayeight out of the nine major
components in retail sales arenegative, excuse me.
Seven out of nine, excuse me,seven out of nine of the major
components are either negativeor up by less than one percent.
Not strong at all.
Consumers choking, and it'svery obvious.
(11:27):
Within that same context CPIinflation, I mean the service
sector X energy of 4.8% yearover year.
All 11 indexes in the servicesector are above 3% year over
year and 8 out of 11 are above4.5%.
It's basically, you could say,service sector inflation remains
(11:52):
5%.
That's more than double theFed's target rate.
So why then, is it strange thatdelinquencies are rising?
And let me throw you a stat onthe back end of this, in terms
of delinquencies on automobileloans, normally when you see a
problem, it's the 18-year-oldsto 39-year-olds that have issues
(12:13):
.
These are people early credit,not as high-paying job, not far
along in their career, not asestablished financially who
start to become late on theirauto loan payments.
This time around it's acrossevery age sector, and the older
age groups are catching up.
The 40 to 70 sect now isinvolved.
(12:33):
Every one of these is movinghigher at a level we haven't
seen since 2008 into early 2009.
I mean at the peak of thecrisis.
What's interesting here is the50 to 59-year-olds and the 60 to
69-year-olds.
The 50 to 59-year-olds and the60 to 69-year-olds both of those
(12:53):
sectors have gone fromdelinquency rates below one to
well above two in just the lastcouple months.
That's a big shiftpsychologically and just from a
statistical standpoint.
But to say, hey, donald Trumpwon the election.
And while I would say lessgovernment is always better, one
side was clearly about lessgovernment, one side clearly
wasn't.
(13:13):
So you know my choice.
I'm not a fan of really any ofthese politicians per se because
they're not unifying, but maybeunity is just not there to be
had anymore.
But beyond that, what you dohave is a rush of sentiment of
(13:33):
bullish exuberance.
Now I'm not going to go AlanGreenspan on this market and say
it's irrational exuberance.
I will say it's illogicalexuberance.
And why do I say that?
Because Trump isn't even inoffice yet.
Number one, number two policieswill take time to play out.
We're not even going to startyet with the policies themselves
(13:57):
, aka tariffs.
But let's just say this is atime frame before anything will
actually happen, and we needstuff to happen now.
The consumer is choking.
Now.
The consumer is still 70% ofthe economy and the consumer is
lagging the stock market likeI've never seen before, and that
correlation is as tight asanything usually gets.
(14:18):
And the consumer is the leaderup and down at bottoms and tops,
and right now it's a bignegative.
We'll talk more about that interms of tech, having been that
leader in a second.
But the point is the consumer ischoking now and fed rate policy
is tight because they're stillwell above inflation, with the
fed funds rate all right abovemore than 100 base points above,
(14:40):
which means they are tight.
Policy is still tight on rates.
Quantitative policy is stillvery tight.
With 800, and I think it's 897billion is now the rolling
52-week net change in the Fed'sbalance sheet.
It keeps hitting new lows everyweek.
So quantitative policy is tight.
Rate policy is tight.
Inflation has started to pick upagain and let's not forget in
(15:05):
case you didn't hear, mostpeople haven't, because it's not
mainstream news that the us hasdropped since the end of june
into july into one of the worstdroughts we've seen in our
lifetime.
Not quite as bad as the droughttwo was it two, three years
summers ago but it's bad andit's gotten bad very quickly and
we've shifted from uh, la ninato el nino and this is not the
(15:26):
kind of thing that you have oneor the other.
It's usually there very quicklyand we've shifted from La Nina
to El Nino and this is not thekind of thing that you have one
or the other.
It's usually there's one andthere's a period of time the
other one develops.
You see, it come.
No, this is bing bang, boomright in a row.
All right.
According to NOAA, as of the endof I think this was November
15th 52% of the 48 US states,52% of the landmass, is in a
(15:51):
drought, a moderate droughtthat's up from 11% in June.
52% over half the country hasexperienced a moderate drought,
up from 11% in June.
22% of the country hasexperienced a severe drought.
22% of the country hasexperienced a severe drought
Severe 22%.
That's up from 3% in June.
From 3% to 22%.
(16:13):
In a matter of what do we got?
July, august, september,october four months In terms of
there's no issue with dryness.
Only 12% of the country now,versus 71% in June.
So you can see how it shiftedfrom June.
Not only that, you have thisissue around the world and this
(16:35):
is going to affect this nextcrop here in South America.
All right, in terms of thingslike soybeans and corn and some
of the other things Already atnear or just coming off of new
record highs.
Many food groups andcommodities cocoa, coffee, oj,
pork, beef, milk, cheese, butterthe CPI in food has bottomed at
negative territory.
You knew it was going to happenand it's coming back fairly
(16:55):
strongly.
Five out of six components inthe grocery groups were up in
the CPI and some dramatically so, some two of them at double
digit annualized rates for themonth, and the one that wasn't
up was unchanged.
It wasn't down and this is abig flip from four or five that
have been deflating every monthto now five inflating again and
(17:16):
the headline food CPI going up.
So this brings us back to theFed.
We've got a credit crunch.
We've got a consumer that'schoking.
We have Fed policy that's tight.
We have a president who wantsto come.
We don't have time.
They need to be a neutral nowand they're not.
What is neutral?
(17:36):
First of all, is it relative toinflation?
You could say with 3.3inflation, that might mean four
and a quarter is neutral.
You would say with 2.6%inflation, neutral, you could
get away with 350, 375.
The market is pricing thelatter 350 to 375.
But that's for the end of nextyear.
We don't have until December of2025 to see that.
(17:57):
So in the meantime, asinflation starts to rise again
and gosh forbid energy getsloose, because it's the only
reason that you are not seeing abigger picture inflation
problem already.
If energy starts to perk up andwatch natural gas, by the way,
I think that that's bottom thencould give us some year over
year vig.
You're going to get furtherstagnation in the underlying
(18:19):
economy.
The consumer All right, andthat, with higher inflation,
means stagflation.
Prepare for that kind ofoutcome.
And then the question becomesis it a credit crunch?
And I wouldn't have said yestwo months ago.
But now we're seeing signs ofthis.
And I go back to what I wrote in2006 in my book Gold Trading
(18:41):
Boot Camp.
I wrote in that book ahead of2008.
We saw the consumer, we saw thehousing bubble, we saw all of
that coming.
I wrote about this two yearsbefore it happened, three years
before it happened.
In the context of that, one ofmy quotes that I like to
continue to use because it'smore applicable now than it was
then, it was true then and it'strue now.
(19:03):
And I remember going on CNBC topromote the book with Joe
Kernan and Mark Haynes anddiscussing this and saying that
the Fed would be forced tomonetize US Treasury debt by
buying bonds, printing money todo it to bail out the consumer
and to bail out the housingorgan.
And they looked at me and it'sfunny, joe Kernan literally got
(19:25):
off the air and I'm back in thegreen room and he's on the air
and he goes wow, we've seen alot of nut jobs on this channel.
And he called me a nut job onnational television.
And of course, two years laterI saw him and had a little
discussion with him about howright I was and how uncool it
was to call me a nutjob onnational TV.
But at any rate, the quote iswhen peering into a debt
(19:48):
deflation abyss, monetaryofficialdom will choose to
reflate at all costs every time.
Now Jerome Powell has given usthis mantra that we know how to
fight inflation.
We have the Paul Volckerplaybook.
He just enacted it, seeminglysuccessful.
The jury's out on that.
I'm not ready to say that.
(20:09):
But you could make that casethat the tightening has done
enough to help inflation comedown in the context of the
natural decline that would havecome anyway from a mathematical
year-over-year base effectperspective.
But when it comes to this andyou're talking about a potential
credit crunch, you willacquiesce to higher inflation to
(20:32):
circumvent the worst-casescenario.
It's a debt deflation.
Now what's interesting is thecommentary from Powell and how
that relates back to PaulVolcker in 1978.
And Powell uses the exact samephrases sometimes.
It's really amazing to comparethe two.
Now, what's interesting backthen is Volcker said the last
thing we want is a creditcontraction.
The difference is that peoplethat I've heard people say this,
(20:56):
and I'm not trying to refutethe feel-good factor, I'm not
trying to refute the positivitythat we have as a result of this
election.
Having said that, let's berealistic.
Okay, this whole, like Reaganismrenewal, this resurrection,
this revival, this whole youknow, new deal, so to speak.
Reagan didn't have debt.
(21:16):
He wasn't saddled with so muchdebt that he could barely move.
This is why you had a 40-yeardowntrend that began pretty much
with Reagan in 1982, with PaulVolcker and Ronald Reagan, where
you had the downtrend ininflation and interest rates
that just ended with thepandemic.
(21:37):
You already have the negativerate doesn't work.
Experiment failing in Europe.
So we know there are limits towhat you can do on the downside.
This is the whole 2018 whitepapers around.
How do we ease policy withrates so low already when we
need to?
This has always been a concernand thank God for whatever
(21:58):
extent the Fed has gotten backinterest rate power to use when
they're going to need it andthey're going to need it because
you have this trend over, whichmeans you're going to be
acquiescing to higher rates ofinflation to save the consumer,
to save the economy from goinginto debt deflation.
Now I'm not saying you're on,you know, on the cliff, looking
into the abyss yet, but, man,you're awfully close.
(22:21):
And the thing that is kind ofleft out here is stocks and what
happens.
People are piling in and Iremember 82.
I remember the S&P was in itsinfancy of trading.
People were kind of like whatis this a stock index?
I mean, it was really esotericback then.
It's really amazing to thinkabout it compared to how
sophisticated everything is now.
(22:41):
But the bottom line is this isnot 1982.
All right, why?
Because, for one thing, fixedincome now means income.
Money markets are yielding 4%and up and have record inflow
and record amounts of money heldin them.
Now you're eventually going towant to release that money into
the stock market, which is whypeople are kind of surprised
(23:01):
that hasn't happened in the lasttwo weeks.
The issue here is I don't thinkpeople trust the market.
I sure don't.
Crypto got a nice boost out ofthat.
You remember, right here I saidyou know you take a measured
move and get above $66,000.
It's's going to 99,140.
There you go, all right, goldheld above 2,500.
Silver's held above $30.
(23:23):
And what's the biggest Trumptrade that maybe sustains out
here?
It's the higher dollar, becauseof kind of higher interest
rates and because of potentialtariffs, which would be terrible
for the dollar and would unwindthe dollar down the road, and
that's a whole nother story.
That's another podcast three,four times down the road.
But a higher dollar is one ofthe worst things for the US
(23:47):
stock market.
The correlation is so tight itwould blow your mind it's the
most reliable tight historicallygoes far back correlation of
anything negatively correlatedhigher dollar, lower stocks,
lower dollar, higher stocks.
It's that simple.
And right now the dollar israllying, breaking out in a
fairly significant longer termdynamic.
(24:08):
So something's got to give hereand I can't help but think it's
the stock market.
And then you say to yourselfwell, you know what's the
leadership going to be, what'sthe engine of economic growth
here in the US?
I mean, well, ai has been theengine of asset price growth for
stocks, but I have saidrepeatedly here that you are two
(24:30):
steps away from that being.
You know all in consumerproducts that you have sales,
that you have teams, that youhave an infrastructure built out
to sell products that arespecific to this, as opposed to
the chips and the computingpower and all the kinds of
things you might need and theenergy requirements and all the
other things where maybe we gota half a step to a step ahead of
ourselves here with AI.
(24:50):
Number one, all right, we knowthat it's not consumer-led, even
the XLY, which has ralliednicely off the Trump trade.
Why?
Because 40% of the XLY is Teslaand Amazon.
You want to pick two stocksthat are going to benefit from a
Trump win and the fact thatonline sales is the only thing
in retail sales that's remainingbuoyant.
(25:10):
You're talking about Amazon andTesla.
So the XLY has kind of beencompromised as a reflection of
the consumer versus the XRT,which is a much broader based
retail store index of stocksthat is falling and breaking
down against the S&P 500.
The consumer is not a leaderhere and the consumer needs to
(25:31):
be a leader.
Now, okay, is AI going to makeup the difference?
Well, it has.
The problem is the front end ofthe pipeline in chips is
already breaking down.
All right, the XSD now all of asudden joining the party and
threatening to break down here,that's the S&P Semiconductor
Index.
The XLK, which had been againstthe S&P 500, an upside leader
(25:56):
this entire time for the lasttwo weeks, has failed to confirm
this move in the S&P.
It's on wind, it's on fumes,it's on whatever is blowing this
thing to the upside.
It doesn't really havesustainability, not right now.
You don't have an upside leader.
Even NVIDIA looks very toppyhere, really toppy pattern.
(26:19):
It looks like it's left hangingout to dry.
It kind of reminds me.
And when you look at Europe too,and the whole election around
Europe with Trump and potentialtrade and potential currency,
and then this whole thing withRussia, european markets are
breaking down and I have saideither Europe or China, which
also continues to suffer,stimulus wasn't enough.
Either one of those areasEurope, the semiconductors here
(26:43):
in the US or China could becomea catalyst for a bigger picture
correction.
These markets are technicallyset up for it.
They are stretched to the maxand that is what this is all
about.
Okay, it's all about the newDEI, debt easing and inflation.
You need to keep pace with theinflation.
It's going to becomeincreasingly difficult.
(27:05):
Passive investments in stocksnot going to be what it's been
since 1982.
Everything has changed and inthat context, you're going to
have to again look to do a lotmore things differently, be a
lot more proactive and be in alot more things differently.
Be a lot more proactive and bein a lot more different
opportunities of differentmarkets per se, and I think that
the rally in Bitcoin is a goodexample.
(27:26):
I'm not a Bitcoin lover, butI'll tell you what.
In a case where you have allthese currencies that are under
pressure and you might havetariffs and you might have
places where liquidity becomesan issue, not everyone's going
to run out and buy bullion.
Then where are you going to putit A lot easier to have a phone
and an account and to buycrypto?
So that's one of the reasonsthat I continue to like Bitcoin
(27:48):
and I do like kind of the actiondown here on this corrective
move in gold and silver.
At the meantime, I think thestock market here looks very
vulnerable.
Keep pace with us.
Follow me on Twitter atWeldonLive.
W-e-l-d-o-n.
Weldonlive.
The product that we put out iscalled the Global Macro Strategy
Report.
That's also on our Twitter pageunder WeldonLive.
(28:12):
I'm on YouTube as user Gregoryunderscore Weldon, youtube as
user Gregory underscore Weldon.
Certainly follow the podcast onTwitter, that's, at money
underscore podcast, and then,you know, check us out.
We like to post some charts andsome cool articles and anything
(28:34):
that we feel might be ofinterest in accomplishing our
goal here, which is to help kindof the you know, the not
professional audience out thereto do what they need to do here,
to keep pace and to stay out ofharm's way.
That's it, episode number oneof season three in the books.
Join me next time for the nextepisode of Money Markets and New
Age Investing.
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