Money, Markets & New Age Investing
Money, Markets & New Age Investing
S3 E12: To Eggheads and Monetary Purists, NOTHING ELSE MATTERS!
In my view, Jay Powell has become "a problem", though NOT because he’s a bad guy with evil intent. I do not believe that. In fact, he seems like a genuinely “nice guy”!
BUT, having said that, he IS an “egghead, an overthinking, theoretical, no action, no skin in the game, no blood-no foul, ACADEMIC.
Jerome Powell is a monetary PURIST and thus, beyond Employment and Inflation…NOTHING ELSE MATTERS!
The Consumer Cocoon…matters NOT, not until there is a recession.
The Credit Crunch and Delinquency Epidemic…matters NOT, not until there is a recession.
The DEFLATION in “real” Retail final demand…matters NOT, not until there is a recession.
The Housing Crisis…matters NOT, not until there is a recession.
The Economy, DEFLATION in the Service sector in particular…matters NOT, not until there is a recession.
Well, guess what, there IS ALREADY a RECESSION underway in ALL the above!
But it matters NOT, because the ECONOMY and the CONSUMER…matter NOT…not to eggheaded monetary purists like Jerome Powell, who FAIL when it comes to having vision, having the “stones” to be AHEAD of the curve!
Powell has MISSED EVERY “TURN” in his entire tenure as the Fed Chair, sorry, that is the SIMPLE FACT!
His Fed has been BEHIND THE MONETARY CURVE at every key turning point!
And he is MISSING it again, WAY behind the curve this time, and for just ONE reason, in his mind there are not enough LAYOFFS yet to tilt the scales towards getting to a NEUTRAL POLICY as quickly as feasible. He believes this even though there are ample signs that layoffs are EXACTLY what is coming next.
Worse yet, from the political side, the Fed actually REVISED their Labor market projections to reflect STRENGTHENING job gains over the NEXT TWO YEARS, offering a vision that includes NO MORE RATE CUTS AT ALL!
For sure, several “dots” reflected that exact projection, and Powell went so far as to SAY SO, during his press-conference (I discuss within the podcast).
And, at the end of the day, with the onerous Public and Household Debt, $55 trillion in total, INFLATION is here to stay, as “reflating” is the only way to maintain growth, which is necessary to facilitate the SERVICING of debt, now “priced” at over $1 trillion per year in Public Debt interest expense alone!
The time for academic solutions, the time for eggheads to spend hours discussing the nuances of nothingness…are far behind us.
The Fed has “lost it", and Jay Powell is “flipping off” every hardworking American, and more so, those who CAN'T FIND WORK!
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Hi, I'm Greg Weldon and welcome to Money Markets and New Age Investing, season 3, episode 12. Hopefully we'll get one or two more episodes in before the end of our third season. We turn over in Thanksgiving and today we're talking about the Fed and Jerome Powell. Bottom line is you know, the problem is Jerome Powell right now, and in terms of where I believe policy should be neutral, you know and should be neutral as soon as possible. I'm not saying you go there in one move, but the Fed failed to signal last week that the rate cut was the beginning of a move, a more directed, a more pronounced, a more defined move to get policy to a neutral stance. And they did not deliver. In fact, powell said policy still needs to be restrictive. It's still appropriate for us to have a restrictive policy. When he cites inflation and tariffs, and guess what? All that's true it is.
Speaker 1:The problem is Jerome Powell is a monetary purist. I like to use the term egghead. It's not really meant to be derogatory, it's more of an academic mindset that is stuck in the classroom, stuck in the ivory tower, stuck in the theoretical world, not the reality of the real world, not skin in the game, not, you know, this is no blood, no foul thing, is no way this a theoretical but take no action. This overthinking, overthinking to me that's like an egghead, all right, and this is someone that's obviously never managed money, never traded the markets and so on and so forth. But you know that's not his purvey, it isn't. He's a monetary purist, which is one of the things I kind of like about him. He genuinely seems like a nice guy and there's no doubt. I mean I think there's no evil intent coming from him. He's not a bad guy, he's a naked and to him, as a monetary pierce, there's only two things that matter employment and inflation. That's it, because that's the dual mandate, that's what we're given. He even used the word exercise at one point during the press conference, as if this is what they do at the fed is just exercise after exercise after exercise. And while I kind of plug into that a little bit because what I do here is what, if, what, if, what, if but I'm scenarioizing what am I going to do if I see these things start to develop and get ahead of them? To be ahead of the curve, to be ahead of the rest of the people in the markets, to maximize my expected value my EV for my customers and my clients.
Speaker 1:For Powell, the fact that you have a consumer cocoon doesn't matter. That you have a credit crunch and an epidemic in delinquencies on credit card debt doesn't matter at all. Deflation in real final demand for discretionary goods and retail sales matters not. The housing crisis matters not. The deflation in the service sector 71% of the economy matters not. It doesn't matter. The economy and the consumer matter not. Nothing else matters except employment and inflation and balancing those two things.
Speaker 1:And this is why the Fed has missed every turn, and in Powell's tenure for sure. I mean we're talking twice way behind the curve and now missing the curve again. Why? Because we don't see dramatic layoffs. And Powell even then talks about the fact that people that lose their jobs are not likely to find one because the hiring rate is so low. So he's flipping the bird, and not only hardworking Americans. Anyone earning less than $100,000 a year is choking and especially flipping off the people who can't find work.
Speaker 1:And what's amazing about all this is the Fed, in their SEPs, their forward projections for the economy, actually say this is the worst the labor market is going to be and it's going to get better for the next two years. And Powell even came out and said look, you know, 10 people said you know multiple rate cuts this year, but nine said not multiple rate cuts and in fact the majority of them said no more rate cuts and if the employment dynamics are going to get better for the next two years, like the Fed projects, that's it. It's one and done. It's an insurance policy according to the worst possible question at the presser which had to be a plant? It had to a plant, it had to such a. You would never ask this question unless you were told to ask this question.
Speaker 1:It's really interesting stuff here. We're going to break down all of it. I'm going to go through everything powell said. We're going to go through all the data and particularly the budget numbers, because this is about debt and the fact that you have to reflate. If you have just killer debt that would wipe out the economy in boom like that, okay, you don't want boom like that, you'd rather stretch it, which is what we decided the 90s. And here we are and that's the only option and the fed will be faced with this option.
Speaker 1:And powell even said look, we got stagflation here and policy can't do both Fix the economy on demand side and keep inflation in check. They know, they know, but they're not willing to kind of put them on the table, on the chopping block every day, like people that you and I probably do I know I do Every single day Stack them right on the table, and the chopping block is there. You never know when the when the hammer is going to come down. So before we get to all that, though because the market end of this podcast normally we go through the market at length at the end there's nothing to do right here other than to wait and see the smoke clear, because the Fed has just blown out of the water this whole thought process, that this beginning of a new easing cycle All right, I'm not even sure people have fully gotten with that yet. I really don't. I'm not sure. It's Monday morning here as I'm recording this. So we'll see, and it's going to be a long one. So we'll see, and it's going to be a long one. So stay with me, but the first thing I want to do is get back to the markets and do this first, do kind of backwards to the way we usually do this, and then we'll get to the data, and then we'll get to the Fed, because the Fed is like it just blows my mind what Powell said it really does. It's important that we note it. But when we look at the dynamic over the last three seasons of this podcast I went back just for fun, actually started over the weekend, did a little examination episode two, season one, episode two december 12th of 2022.
Speaker 1:I mean, we're coming up to three years ago, all right, and the episode was entitled Silver is Dirt Cheap, hello McFly. All right, december 12, 2022, silver was traded at $2,304. Said silver was dirt cheap. Today it's $4,285. It's actually above $4,300 right now. Since I said silver is dirt cheap, it's up 87%. 87% Over $20 per ounce.
Speaker 1:I actually said weight your ownership towards gold until the gold-silver ratio flips, which it has since then. But at the time, december 12, 2022, I said buy silver, buy gold, weight it towards gold and buy the mining shares ETFs. That was our production. I mean, and even ask the question got gold, like, got milk, like it's just? You know it's standard In any household. You should have gold. All right, I'm not saying keep it at home, but that's a whole other story, because you shouldn't.
Speaker 1:Bottom line is gold. December 12, 2022, episode 2 season 1 dirt cheap at 1790 and I even remember saying like 1790, it's almost 2000, seems high, like this is the highest price ever for gold. But throw that thought process out the window because people will be chasing this market higher and this is. And we said buy gold because we understood that at the time central banks buying gold it wasn't speculative, it wasn't wall street money rotating in which you have now. We said you would get to this point. That was part of our year ahead outlook for 2025, which you see, the rotation you're seeing now and this little bit of speculative fervor you have going on now wasn't the case in 2022 at all. It was central banks, brics, countries that had to sell treasuries, take the dollar proceeds, buy gold, import the gold, which is why the vaults dried up and lease weights went up and the whole nine yards around the bullion banks in London and it's kind of exposed the shorts, the paper shorts, the bullion banks, the JP Morgan's at home, enormous short positions that they could never deliver upon if people wanted to deliver this stuff. Gold was $1,790. It's now $3,700. It's up almost $2,000, 107% since I first recommended it on this podcast. 107% since I first recommended it on this podcast.
Speaker 1:The mining shares a little bit more late to the party. We said they would be and we said also watch Lake Newmont, angle Grove, ashanti and Barrick, because those are the big three and if Wall Street money was going to move, wall Street managers are going to buy the stocks. They know, the stocks they can validate towards their bosses, whoever iseing them. You know, here's the stocks we own, instead of some of the more speculative mining shares, which is the ones we preferred and we ran through them last podcast. All of them. Uh, save new gold, which is a newer purchase, triple digit gains since we bought them.
Speaker 1:What's interesting here is the GDX was the choice. Then, all right, and the GDX on December 12, 2022, said buy it $28.82. It's now $73. It's up $43, $44 on a price less than $30. It's up 151%.
Speaker 1:The SIL again came later in terms of its performance. We liked it all along, of course. All right, december 12th, trading $28. Now it's $67. It's up $38, 136%. So you know that's kind of where it's. Last time we took a victory lap. And then, of course, every time you take a victory lap, you know that you've gotten a little too arrogant and the market's going to smack you square in the nose, and that's exactly what happened this past week, because I really thought the Fed was going to use this opportunity to make a shift.
Speaker 1:All right, I was looking for the curveball Powell threw. I had to duck and still manage somehow to strike out, because short the dollar didn't work out, so that was one of our bigger positions coming in. You also had big corrections in gold and silver that were very short-lived, which is why they look really strong here and, at the end of the day, the only position I have on after last week, I still want to be short the dollar very much, so that is the biggest trade going forward outside the metals and the metals have responded to that and the metals are already higher, and I actually had recorded this once. It was too long, so I'm re-recording it this morning, worked on it all weekend. It's a good one.
Speaker 1:Get the chart pack too, because I put together an entire 44-page chart pack. All the data the macro, the markets, and all the data, the macro, the markets and all the feds words, all the pals words, and the beige book too, are in here. You really should see this good stuff for free. No problem, just email me, greg weldon at weldon onlinecom. G-r-e-g-w-e-l-d-o-n at weldon onlinecom. One word um at the bottom line. Here is where were we? Um, yeah, I mean it's still silver. I mean so it's funny, because taking a victory lap and crash the car into the wall now still a phenomenal quarter, you know, for the money management clients are thrilled, I mean tickled pink. Get back some profits, because we had big profits built in these positions.
Speaker 1:I just levered up a little bit into the Fed meeting, thinking really Powell would deliver and he didn't. That's not why I'm saying these things either. I mean I'm saying it because I believe them. I have my money where my mouth was. I still believe everything I'm saying. Dollar short is one of the biggest positions you're going to see over the next 12 to 18 months.
Speaker 1:Let's go to the data. All right, because the data is intriguing, because you know, look, you know if there were any other thing you know. And again you can even say, look, the stock market is part of the problem for Powell. I mean, how is he going to, you know, really kind of validate, you know, rationalize, going on a new easing campaign when the stock market is at record highs? Maybe you need disinflation in equity prices before the Fed feels comfortable here. I don't know. That's a really interesting point and I can't say that I blame them. I mean it's a nuance here. They have an argument. It's just the problem is the argument leaves them exposed to when things are obvious in their argument, it's too late.
Speaker 1:That's the problem and that's always been the problem with the Fed and the market's predicting three percent interest rates. The fed is at 3.6, talking fed funds by the end of next year. We've seen this over and over again and until 2022. The market was always right, the fed was always wrong. But it's part of the fed's job to be optimistic, right. So I understand, but in this case I think it's become a tad I use this word gingerly irresponsible. Flipping off the average Joe, jane Doe, mom Pa Kettle if you remember that I'm an old black and white movie buff, film buff, mom Pa Kettle it was like during the Depression, they were the average family out there that were struggling to find food.
Speaker 1:Let's look. And when inflation comes back, because it's here, and let's look at it, and I get it from pal's perspective. The inflation numbers are daunting, but that's kind of not really where the focus should be when you have 55 trillion dollars in debt between household debt and public debt. That's the problem, that's difference. That's what the Fed is not taking into account in terms of being neutral. I'm not saying be stimulative yet, I'm saying be neutral here Because bottom line, you can say the risks are balanced. And yes, inflation is a problem.
Speaker 1:Cpi, I mean 0.4 for the month. I mean that's not chump change 0.4. I mean, frankly, I went back and looked at all the months over the last decade. If you extract the two-year period, you know 20 to 22,. The pandemic inflation 0.4 or higher. Only 17% of the time, 17 out of 95 months, did you get 0.4 or higher as a monthly CPI. It's almost 5% annualized. It's huge, all right.
Speaker 1:Not only that, when you break it down, food 0.6 for the month, that's 7%. And I get it. It's not compounded Well, it's not annual, it's not a true annualized. I don't care. All right, we're doing making it simple, most people, so you know, let's make it easy, I'm the math geek here 0.6. All right. So let's say 7% annualized.
Speaker 1:Energy 0.7 for the month, 8 plus annualized. And I have said this how many times over the last three months Watch energy, because the base effect is ending and it is, and we see it in PPI particularly. I'm going to go to those stats in a minute. Shelter 0.4, that's again 5% annualized. The numbers are high, I mean they're just high. And when you look at the year-over-year rate 2.9. It's up 60 basis points since April. It's up 60 basis points since April and 2.9 is the second highest of the year. Food 3.2, up from 2.9. Second highest of the year Food 3.2, up from 2.9. And energy with a 2.9 headline, energy is still minus 6.6 year over year. Inflation is here.
Speaker 1:And then when you look at PPI, well, at first glance PPI wasn't that bad. It was down a tenth for the month, expected to be up 0.3. So everyone was celebrating PPI because it means forward. You know CPI is going to come down and it was 2.6 year over year for PPI, down from 3.1. It dropped 50 basis points in a month. That's a big decline, all right, but 2.6 is not low. Don't get fooled by PPI. It's not low at 2.6. It was 2.6 in 2022, 2018, 2011, 2007, 1999, 1997, all of which presage periods of economic turbulence.
Speaker 1:And here's the rub you have to break down PPI because it's crude, intermediate and finished. And crude meaning raw basic, not crude oil. These are the stages of processing, because it's producer price index, right. So you have three stages and the number is broken down into three stages. Then you get the headline, the headline, 2.6, down 0.1 for the month. Mostly energy Energy's down 2.5 for the month. Energy materials at the finished level and still finished ppi was up 0.4 for the month. 5 annualized year over year, 3.3 up from 2.5. It rose 70 basis points even though the headline rate fell by 50. Finished ppi rose by 70 basis points. Energy is still down 3.2 for the year. Year over year Services 4%. And Powell's sitting here saying well, you know, the tariffs are going to be a goods issue and services are at 4.0.
Speaker 1:In the CPI number, services first of all, they cut the number of service cpi indexes by about 30. It used to be 114 components, now it's 77. That was mind-blowing and it did. I freaked out. I was looking, I'd missed something, I'm missing a page. I went back, I went through the headlines into the footnotes. Oh, my god, they reduced it all right. So what's interesting here is 65% of service CPI indexes are above 3% year over year. The headline rate is 3.6. 3.6. Ppi service is 4.0.
Speaker 1:These are inflation numbers, man. They're huge. They're double the Fed's target. 40% of service CPI is above 4% and 20% is above 5% or greater year over year. Only 28% are below target in service CPI indexes. This is inflation big time. It really is.
Speaker 1:Now what's interesting about it is the Fed talks a lot about inflation expectations and Powell keeps saying including just now he said they're very well anchored quote unquote just in a press conference because he was asked about inflation expectations and he basically what he did was he dismissed the Michigan survey because it does tend to be more volatile. A lot of people think there's some issues around the politics or whatever. The numbers are what they are. If you understand where they come from, you understand what they are and then you can deal with them for whatever value they may or may not provide, whatever partial value they may or may not provide. It's understanding exactly what these numbers, where they're derived from, what they come from, what they represent.
Speaker 1:But the problem for Fed is it's the New York Fed's own consumer expectation survey. That is the problem with saying that inflation expectations are well anchored. They are not at all the one-year inflation expected rate right now. This is a really cool survey and there's all kinds of different ways to look at it. That's why it's such a valuable tool. The one-year expected rate is 3.2. That's up from 3.1 in July and 3.0 in June. It marks the 57th out of the last 58 months to be above 3. The 57th out of the last 58 months to be above three. How are inflation expectations anchored if they're 50% above the Fed's target and have been there for almost five years running? The one-year inflation expectation in the New York Fed survey for food is 5.5. 5.5%. Good questions asked about food prices at the press conference. We're going to get to that Now.
Speaker 1:The Fed survey again very interesting, because they also have a distribution and then they have a whole kind of you know they have various ways to measure this. One of them is the median prediction point. Okay, it's kind of what I mean. It's kind of the I guess you would say the middle of where all the range of estimates are. It's much higher than the headline. 3.2 is the one-year expected rate. The one-year median prediction point is 4.5. 4.5. From a zero spread above the expected rate. Zero was the spread, they were the same in November. Now 4.5 is 130 basis points above the expected rate of 3.2. It's like moving averages too, and it means inflation is going higher, but it gets worse for the Fed because the three-year median prediction point is four percent.
Speaker 1:Consumers are telling the fed we don't see inflation. We see inflation double your target for the next three years, through 2028, when you get to the distribution. And this is where it gets. Really I love this data the percentage of consumers that expect every level of inflation right now, and the low on these numbers was in October of 24. You had October to like March, april. All of the inflation indicators bottomed during that period and they're all moving higher now, including the expectations from consumers, as reports to the New York Fed. All right, the percentage of consumers expecting inflation to be above 4% over the next year. One year was 37%, in October. It's now 44%. Hello, the number expecting it to be below target has fallen from 38% to 33%. 44% expect above 4%, 33% expect below target. Think about that. Think about that. And one more thing on the New York Fed.
Speaker 1:Because when you take the expectations for inflation, the 3.2 headline, let's use the expected rate, let's play nice, let's play conservative, and then we break it down by income Below $50,000, which is kind of poverty almost. I mean I don't want to say that word, but it kind of is it's hard to make all your bills, let's put it that way. If you have a family, forget it. You're of is. Uh, it's hard to make all your bills, let's put it that way. If you have a family, forget it. You're deep underwater every month.
Speaker 1:50 to 100 000, which includes includes, like the average and median income levels, you know, 65 to 85 000, depending on which measure you look at. And then above 100 000. All right, let's take a look. All right, inflation versus their expectations over the next year for their income to grow. Below 50,000, inflation 3.1, income 2.5. Real income falls deflates 0.6. Between 50,000 and 100,000, inflation expect 3.4. The more you make and the higher your education, the higher you think inflation is going to be. By the way, 50,000 to 100,000, 3.4 inflation against 2.8 income Real income deflates 0.6 over the next year. Do you think people are going to run out and go to restaurants and go to bars and go spend money on things they don't need when they expect their real income is going to deflate over the next 12 months? The Fed is kind of losing it. They're not listening to their own data. And then, above 100,000, and this is key, because this had been a very resilient. Source of the last bastion of strength in the economy was those that earn over 100,000, their mood is souring quickly and, at 3.2 inflation, they expect their income to be up 3.2, which means no real income change, even for the wealthiest people.
Speaker 1:And in that context, let's not forget consumer credit. Okay, because revolving credit has now downed $27 billion over the last 12 months. Revolving credit, which means it includes credit cards and I've talked about the weekly commercial bank numbers and credit card loans contracting. Okay. Now, yeah, consumer credit rose $16 billion in the most recent month, which frankly sounds like a lot, but it isn't compared to where we've been. So it's still negative and the year-over-year rate is still deeply negative. And it's only been negative on a rolling 12-month basis in revolving credit two other times in US history, and now global financial crisis 2009, pandemic 2020, and now that's it. That's it. It's a consumer cocoon, it's a credit crunch, it is virtually unprecedented and the Fed is just flipping the bird.
Speaker 1:Not only that, here's another great stat. I love this stat because it's so telling. Trust me on this, because I pinned this out in 2007,. Big time, and man, was it right on when you are.
Speaker 1:Consumer credit is broken down into the sources of the credit. Commercial bank consumer loans have fallen over $100 billion since the end of the third quarter of 2024. Over $100 billion, that's more than 10%. All right Finance companies down $17 billion. So you know, go to the bank, they won't lend you money. You go to the finance company, they're going to pay more, they won't lend you money. Where do you go? You go to the credit union money. You go to finance company, they're going to pay more. Then we'll lend you money. Where do you go? You go to credit union. Credit union loans to consumers up 71 billion over the last, since the end of third quarter of last year almost a year, 11 months. It's.
Speaker 1:The only source of growth is is credit unions. We saw this in first quarter, second quarter, 2008 of 2008. Same thing, because that's the last place you can get credit, that is the easiest place you're going to get credit. And when we see that number turn down, that's going to be a bad, bad sign for the consumer, a bad sign for the Fed. They're not listening to their own data or any other data and the bottom line is they stick to this 2% inflation target.
Speaker 1:The last time you were below two percent on cpi, which admittedly, they're targeting pce. I get it, but cpi below two percent. The last time was february 2021. Joe biden's presidency wasn't even half over 54 consecutive months above two percent, and the closest was just recently, in april, when you were 2.3. And now you're already 2.9, which, again outside of the period from 2021 to 2023, 2.9 would be the highest cpi in 12 years. 12 years and on the other side, of course, we the labor market, which we will talk about. But you also have the elephant in the room, the 800-pound gorilla in the room, the Tyrannosaurus Rex in the room.
Speaker 1:Okay, you have 11 months of this fiscal year in budget numbers. The budget deficit reported for August $345 billion. $345 billion More than that. We spent more than twice what the revenue was, and there are five months when either you did that or you were just within a couple tens of billions of that. Three months specifically, you spent more than twice the revenue the government did and in five months, it was pretty close to the same. Okay, right now, revenue for this fiscal year covers only 70% of spending. Last year, it was 73%. All right Now.
Speaker 1:There's a lot of people out there that want to say well, you had tariffs and that helped the budget situation. It's paying down debt. True, absolutely true. $22 billion was the positive flow net from customs duties. Total customs duties were $29.5. You had a $22 billion positive flow in. Okay. Compared to a $344 billion single month deficit, $22 billion is a drop in the bucket. It's an eyeglass squeeze or drop in the bucket, even though you had this allegedly huge. And guess how long it would take to pay down one year of debt at $22 billion a month? Yeah, decades. Okay, that's not the answer, and anyone that tells you that that's a big deal is ignorant or is lying. Despite this record and it was a record 22 billion positive flow from customs duties the $345 billion deficit in August was the 10th deepest in US history, and all 10 of the 10 deepest deficits in US history on a month-to-month basis have come since April of 2020. It projects to be the third deepest fiscal year deficit in US history In history.
Speaker 1:I mean this is just not history in history. I mean this is just not sustainable. We're chronic debt addicts and this is why you're going to have to choose to reflate. You have to or you'll get a debt deflation which is like the 1929 thing, 1930s. You know they'd rather have the 1970s than the 1930s. That's just the way it is. Uh, and over the last, since August of 2008,. 426 months this is how chronically addicted we are to debt in this country and the federal government. 426 months goes back to August of 2008. Only 36 months do we have a budget surplus that's 8%, one of which we just recently had surplus that's eight percent, one of which we just recently had eight percent. Only eight percent out of 426 months. 390 months. We had deficits 92 percent of the time.
Speaker 1:And we talk about social security. You have to do away with social security. You have to. All right, that doesn't mean people that are getting their benefits or they're going to get their benefits in the next 10 and 15, even maybe 20 years, are going to lose them. That's not what this means. It means that some grandfather rate or age, rather below age 40, below age 45, you lose whatever you put in. It's just a fact. You already lost it and I did a big study two years ago or three years ago, when New York state raised their welfare tax.
Speaker 1:The city and the state raised welfare taxes and I found that man, young people would be so much better off doing their own retirement. You don't need the government to hold your retirement. That's ludicrous. Think about that. Do you really want to maintain social security? You really want to keep letting the government manage your retirement fund with their mismanagement, their irresponsibility? If this was any business, they'd be shut down and probably the people thrown in jail for running a ponzi scheme. Come on, man, do it yourself is the way to go.
Speaker 1:Social security has got to go, but it's political suicide because of all the lies that politicians tell that scared the elderly that they're going to lose their benefits. I hate that. It's despicable. All right, you'll never solve this problem unless you face it with reality. Here's the reality. Okay, so far this year, fiscal year, 11 months Medicare spending $2.44 trillion on Social Security and Medicare Retirement income revenue. Okay, so you're bringing money in to Social Security, right? 1.6 trillion versus 2.5 out. That's almost a trillion. Right there, it's 40% of the deficit. You get another trillion from net interest cost and bam, there's your deficit. Social Security and interest and interest payments now outpaced by far health care, defense, veterans and education. It's ridiculous, but this is what the Fed is facing.
Speaker 1:And while I have a few minutes left because this is a long one, but I have to go through the Fed's comments. We have to talk about what Jerome Powell just said, because it's nothing less than jaw-dropping. I'm going to skip through the Beige Book. Get the chart back. You're going to want to see all these charts, all the deficit charts, all the debt. All these charts are in here. And you're going to want to see the long-term monthly budget numbers. I mean, that's a really cool chart the Beige Book, talking about consumers being squeezed by rising costs of insurance, utilities and other expenses.
Speaker 1:From the Beige Book, contacts report flat to declining consumer spending because for many households wages are failing to keep up with rising prices. Bam, I keep saying it, it's all I'm saying. From the Beige Book Firms are hesitant to hire workers. There's an increase in layoffs, reduced headcounts through attrition and increase in the number of people looking for a job. That's the Beige Book Problem.
Speaker 1:Is the Beige Book on prices Bad? It's bad from both sides. I get Powell's dilemma. I just think he's choosing the wrong way to look at it. Nearly all districts this is from the Beige Book all districts tariff-related price increase. Contacts report rising prices for insurance, utilities and technology services. All districts described hesitancy in raising prices, citing customer price sensitivity, a lack of pricing power and a fear of losing business Margins are going to take the hit and stocks are at new highs. A lot of this doesn't make sense. And here's the piece de resistance in terms of the beige book just out two weeks ago, clothing retailers marking up prices by 10 to 15 percent, citing tariffs as the reason. From the baseball restaurant contacts say menu price is increasing in response to increases in wholesale food prices, fuel prices and insurance rates. And here is the final kick in the stones From the Beige Book Hotel prices rose despite decreased occupancy rates.
Speaker 1:How do you spell stagflation? You spell it Beige Book All over it. But what does the Fed have to say about this? All right, it says the question from ABC, elizabeth Schultzz. Good question, how concerning about you to slow down in jobs for households, especially younger americans struggling to find a job? Well, that's why we become more neutral. As powell's answer more neutral. There's no such thing as more neutral. You're either in the war or out of the war. There's not degrees of neutrality. All All right.
Speaker 1:And then he goes on to kind of mumble. There's no mumbling and jumbling. Get the text. You're going to want to see this text. I did it out with highlights and everything. It's really cool when you see just like he's stumbling to try and get his words off.
Speaker 1:He's not really doesn't know what to say. You know, he's basically said we cut rates, which will be well, which will presumably be better for the labor market, but, yeah, kids coming out of college and younger people minorities are having a hard time finding jobs. The overall job-finding rate is very, very low. However, the layoff rate is also very low. So you've got a low hiring and a low firing environment. That's a growing concern for the last few months, last few months, and basically what he's saying too, by the way, is, if you lose your job, you're not finding a new one. Those laid off, there won't be a lot of hiring going on.
Speaker 1:Then you're talking about the dynamic around inflation, elizabeth Schultz, again. Well, the inflation reports show prices going up in key categories, including groceries. What will the Fed do if prices pick up more? What will the Fed do? And here's Powell's response. I'm Jerome Powell now. So what will we do? It's kind of how he said it. I mean he was not stumbling as bad as I am right now. We'll do what we need to do, but we have two mandates and we try and balance them All right.
Speaker 1:This is quite an unusual situation. How do we decide what to do, because our tools can't do two things at once. What Hold on? Stop the presses? What hold on, stop the presses? Jerome powell just said we can't fight the stag and deflation at the same time. We have stagflation, and he said he used the word. He used it. I've been saying it for 18 months. It's coming. He's here. Our tools cannot fix stagflation. We'll have to choose one and you will choose to reflate. Hands down. Bet my reputation on it. I bet my reputation on it in 2006.
Speaker 1:I was called a kook for saying the Fed would monetize government debt and print new money. Was Joe Kernan called me a nut job on Squawk Box Before millions of people? Now, I don't know. You've got maybe tens of thousands of people watching. Four millions of people? Now I don't know you've got maybe tens of thousands of people watching. So this really kind of all comes down to do.
Speaker 1:We think the Fed is actually in the right position, and the best question came from Nick Timoreos. Now, this guy's really good. Follow him on Twitter. He's excellent. Okay, even though he's from the Wall Street Journal. Okay, he's highly respected. The journal used to be highly respected. But he asked the most pertinent question, thank you.
Speaker 1:Do economic conditions and the balancing risk no longer warrant a restrictive policy setting Bam Need to be neutral 100%? Here's Powell's response. I don't think we can say that. No, I don't. We cannot say that the risks are clearly tilted to inflation, but I would say they're moving towards preliminary equality. What the hell is preliminary equality? Again, this is central bankese Fed speak at its finest, at its worst, and then it goes on. I would say they're moving towards preliminary equality. Well, maybe they're not quite at equality, but we don't need to know that. Yeah, you do, that's your job, okay, and at least pretend you know it, okay. And that suggests that we should be moving. We should be, not that we are, that we should be moving. We should be, not that we are, that we should be moving in the direction of neutral. So he says we're getting more neutral, okay, which is meaningless, but finally kind of puts it out there we should be moving in the direction of neutral, but they're not. Because they are saying, still, we can't say that we no longer warrant a restrictive policy. Aka, it warrants a restrictive policy, the risks are moving towards preliminary equality and that suggests we should be moving in the direction of neutral. But they're not. That's the problem.
Speaker 1:And then you get the plant. The last one Long podcast today. But this is it, of course, from the New York Times, of course. I'm actually just realizing that now. I didn't even notice that before Colby Smith. I got nothing against her, necessarily, except she's a plant. Here's her question Should we be viewing today's cut as the committee taking out some insurance against the possibility the land market is at risk of weakening? That's a planted question. Why would anyone ask that question, unless you were directed to ask that question and, of course, leave it to the New York Times to be in cahoots. I mean just no credibility whatsoever and this question just verifies it, if that's what you think already. But Powell kind of exposes a major problem here with his answer and he doesn't even know it.
Speaker 1:Yeah, I think, I think you could say, in a way, as a risk, this was a risk management cut because if you look at the scp, which is the economic projections, the projections for growth this year actually ticked up a bit and employment really didn't move. That's false. That's a lie. That is a lie. Okay, and here's why Because employment did move Next year and the year after their employment projections to be dramatically better, much lower unemployment for next year. Next year, the majority, the biggest vote for unemployment rate next year was 4.7. Now it's 4.4. Hello, from 4.7 to 4.4. The biggest grouping for 2027 was between 4.5 and 4.7 to 4.4. The biggest grouping for 2027 was between 4.5 and 4.7. Now it's between 4.2 and 4.4.
Speaker 1:In other words, the Fed is saying this is the worst the labor market is going to get. You're going to see a much lower unemployment rate in the future, and that would imply that they're not even going to cut rates again, that this is an insurance policy. I mean. This is why I think this question was the plan. So Powell could say all this we need to be restrictive because inflation is a problem and we expect the employment thing is not going to be. That's what they just said. And here is the end game. And here is the end game. This is one of his last comments, okay, when he was asked about. You know the dot plot he says so you have seen that we have 10 participants out of 19 who wrote down two more or more rate cuts for the remainder of the year, but nine who wrote down fewer than and in fact, in a good number of cases, members wrote down they expected no more cuts.
Speaker 1:If you think the employment market is going to strengthen from here and inflation is too high, one and done could be what this was. I really beg to differ. I think you know doesn't want to telegraph this, because the stock market's at new highs. I think there's a lot more nuance going on here. But at the end of the day, if you just take it for face value, jerome Powell is just flipping off the average, joe, jane Doe, mom, pop kettle and the market, because the market's expecting 3 percent fed funds by the end of next year.
Speaker 1:According to the. To powell it could be. You know, the average is 3.6. It's a 60 point difference and I'll tell you until 2022, this is always the way, because I get it, the fed needs to be optimistic. It's part of the thing. So yeah, of course, let's say the employment market is going to be great, because this way it instills confidence. We've already seen. I mean powell asked about inflation expectations. He basically said if we stick to our two percent guns, people will believe it. We can talk down the market. Really interesting stuff.
Speaker 1:The bottom line for me, though, is this does put into question, at least in the near term, just the fed's part of this in terms of the dollar depreciation theme, and maybe that's what they want to see. Maybe they want to see a little stronger dollar where it can take some of the pressure off inflation, and if it is coming which of course it is, and they're not going to be able to manage it, it doesn't matter. None of this matters, and that's why, ultimately, the dollar down and all the rest of the trades that we've been promoting here will continue to work over the longer term. In the near term, there's some suspicion here that you could see corrections. I would say the market's going to see through this because, like I was going to say, until 2022, when everyone was late to the curve on inflation, except for us, of course, all humility aside, we were all over this Transitory.
Speaker 1:No, we used to say waiting for Godot, the alternative ending, because, you remember, the Fed waited for inflation for years, since 2015. Inflation is going to be 2. Inflation is going to be 2. It never even got there. It was always lower, always lower. It was like waiting for Godot, and then I forget what year. I think it was 2020, early 2021. I said waiting for Godot, the alternative ending I think it was even a podcast title when Godot's gonna show up, meaning inflation's gonna come and no one expected it to.
Speaker 1:But every other time I mean in my entire career the market is always more right than the Fed, ultimately in projecting where interest rates are going. It's that simple. Why? Because the Fed no disrespect, I wouldn't want that job, the hardest job in the world Got a lot of respect for that. On the other hand, let's call a spade a spade. Let's call an egghead an egghead. Let's call a diamond a diamond. Let's call a heart a heart. Let's call a club a club. Let's call an egghead an egghead. An academic with no skin in the game, no blood, no foul. You know it's really about exercise, no foul. You know it's really about exercise. Remember what the feds chairman powell said at the end of the day, this is all a big exercise to these guys.
Speaker 1:The one position I'm still holding right now is long silver might add gold in here could change very quickly. I like energy. Distill is, in particular, very low supply. They're building, but it's a race against time. We'll see. Heating oil could be a big story later in this winter and I would continue to look at and I just did a special which you can also get if you want to email me.
Speaker 1:On the dollar, okay, I mean the number of currencies breaking out, breaking multi-year, multi-decade trends against the dollar is. I mean, it's a plethora of currencies, it's a very long list of currencies. I mean emerging markets main currencies, I mean it's currencies all over the world. Major long-term breakouts against the US dollar. That is still the big story. Silver and gold at new highs still the big story. As far as the rest of it, right now it's a little tricky. So I think that having a higher degree of cash even as the stock market breaks out not necessarily the worst thing in the world.
Speaker 1:Follow me on Twitter at Weldon Live the podcast, at money underscore podcast. We're on Buzzsprout and we're available everywhere. I'm also on YouTube users backslash, gregory underscore Weldon and for any information on our services. We do daily research with recommendations in all the markets fixed income, foreign exchange, global stock indexes, all regulated futures contracts, ETS. We talk a lot about it. We do discuss the individual stocks. Although we can't officially recommend them specifically. We, you know, give you rankings on the best mining shares and these kinds of things that have really played out extremely well in the three years that we've been doing this, as we discussed at the beginning. For any information on any of that, including my cta business as a registered three uh commodity trading advisor who manages individually managed accounts money is in your name. Nobody touches it, nobody, nobody commingles it, so on and so forth. Never see me on American Greed. Email me, greg Weldon, g-r-e-g-w-e-l-d-o-n at Weldon Online and thank you so much for listening.
