TRANSCRIPT
good morning sense of things welcome to
the sense of things podcast with Ron and
Jeff and we have part two of an episode
we just did this if you haven’t watched
part one yet go back we’re covering some
of the economic some things we’ve never
covered really things like the Som Rule
and some other economic factors and
charts and things like that that give us
an idea of where we are in the cycle so
stay tuned and we be right
[Music]
[Applause]
back hey everybody welcome back to the
sense of things with Jeff and Ron Ron
how you doing my friend good morning
Jeff yeah unfortunately we got to
continue the conversation about
recession indicators I’m going to bring
up my screen now we’re going to go
through part two and I screwed up the
the The Economist name it’s I don’t know
I’m not sure I said his name was Cameron
Howard I don’t know how I came up with
that his name is Harvey Harvey now the
interesting thing part about this and I
I didn’t bring up the other charts but
we have been talking about credit card
delinquencies and credit card carryover
debt for over a year under about a year
now and here’s the interesting thing
every chart tells a story I’ve said that
a million times too
this chart tells it all yeah we have
credit card carryover debt at all-time
highs it breached 1.1 trillion and now
their 30 the 30 60 and 90day delinquency
rate is absolutely
peing and all the and also by the way at
an average of around
21.6% yeah
yeah I’m speechless because I’m trying
to figure out how long can this continue
before the consumer says screw you I’m
not paying $15 for a Big Mac meal yeah
right which is already started by way
which is already happening yeah but just
in general like how can this carry over
to the point where if they’re delinquent
on these credit card balances think
about the interest that’s piling up the
interest part of this is going to be 10
15 20% of their overall balance I I
can’t even can’t even calculate this I
my brain isn’t working at that level to
try and figure out what this is actually
going to mean I did the math for this
with a a client because we were talking
about his kid that he was really
struggling and was using credit cards
and all that and I said do the math it’s
going to take him 18 years if he’s
paying the minimum payments 18 years
yeah to pay off that debt assuming he
never charges another doar
going forward for the next 18 years
which live your best life yeah the
reality is it’s not even people that are
trying to live their best life it’s
people trying to keep their head above
water at this point and you’ve seen food
infl I love when the government tries to
play the game of but inflation’s come
down from 9 to three yeah but it didn’t
go backwards it just we’re just piling
3% on top of the 20 or 30% and cost
raises going on so it’s not back and our
wages have not kept up with that as a
small business owner I can’t afford to
pay somebody 20 or 30% more it’s not
going to happen so what do I do I just
don’t hire somebody in those cases so we
just those of us that are here on staff
we work harder every day couple of my
companies but if you think about it I I
think it’s the Federal Trade Commission
the FTC yeah that monitors companies for
price gouging or predatory pricing and
if you think about it because when we
started to bring this up if you take a
look at the chart I think it was
September October of last year when we
started to see y the the credit card
interest rate precipitously tick up from
an average of 16 to 17 yeah to
21% and you don’t think that the credit
card companies don’t know about consumer
spending habits because look at the
spike up y of the 3060 and 90 day as
those interest rates were going up and
my whole thing is where the hell are the
politicians and the
FTC I’m sorry
21% no you got to have something more
reasonable yeah because the bankruptcy
rate is just gonna Spike up and there’s
more lawyers in law school than there
are lawyers that are practicing they
want a good steady flow business in the
next three to five years become a
bankruptcy lawyer yeah no kidding and by
the way get your money up front
yeah which I’ve never retainer yeah
which I’ve never understood how
bankruptcy attorneys actually make money
because they get their money up front
yeah but where do the people get the
money people are paying them on their
credit
cards yeah I take credit cards of all
kinds I should we shouldn’t be laughing
but godamn this is just bad news it’s
horrible and it’s going to affect a
generation of people this is going to
drag on for the next five to 10 years
this isn’t going to be resolved or
flushed out in a year or two no it’s
going to take years for people and if
you have a 30 a 60 a 90day delinquency
and it goes and charged off that’s 7even
years your credit is going to be
massively affected yes at this point I I
try and buy a house try and buy a car
get an apartment Insurance your car
insurance your homeowners insurance are
going to go through the roof everything
is affected by buy your credit score
today this is a big problem yeah all
right we beat this enough just it’s a
just a terrible but I think I think it
leads to we were having these
conversations last summer as we were
seeing those balances go up and go up
and then interest rates started going up
and it’s how long are these people going
to be able to hang on and then we
started to see where credit the credit
that was being granted was going down
where where these credit card companies
are protecting themselves and and I get
they’re keeping the rates up because
they know there’s going to be a crap ton
of delinquencies so they’ve got to make
their money somehow which is to stick it
to the people that that still can pay
yeah I agree and I know we talked about
this when we were going through the P
rule in part one yeah but if you just
take a look at the chart
here every time other than a little blip
right here when it did invert looks like
for maybe a day or a week basically
every time it inverted on the way up as
it uninverted is when we came into a
recession the interesting thing about
this time frame is as we were coming up
from a precipitous fall this was the end
of 23 early 24 when everybody predicted
the recession or a recessionary
condition now we actually briefly
uninverted for I think half an hour than
the last week but here we are again
so we have a Confluence of factors here
here is the 210 but what does a
recession look like in these
circumstances what I mean by that
is is it shallow is it deep is it deep
and wide is it shallow and wide people
have been saying we’ve been having a
rolling recession across the country and
across sectors for a year and a half now
but we don’t pray for it we’ve talked
about this before we do need a flush out
and there will create opportunities for
invest
that are smart and listen to their
advisors too but this could be another
brick on the crack dice that we’ve
talked about before yeah and that I
totally agree and you and I have been
saying this and we’ve I felt like a a
just a broken record just saying okay
we’re everything is pointing to that but
more and more things are pointing to it
and like I said that last straw for me
was Friday’s unemployment or Friday’s
unemployment report and the unemployment
number that’s been the only thing
holding people up and quite frankly I
own a wealth management practice but I
also own a a co-working space so I I’ve
got all these different companies and
people working remotely and things like
that and I cannot tell you how many
people just hearing conversations in the
space that work for big companies that
are talking about oh man there’s layoffs
going on so I think Intel just had a
huge layoff yeah a couple of other
companies that I’ve got people that
remote workers that work out of my space
here and they’re these are guys that are
in the technology space and they’re like
yeah we’re hearing thing rumors about
layoffs and stuff like that that’s not a
good sign it’s really especially in the
tech sector is usually ahead of the
curve there yeah it is because well they
because they they tend to overdo it
which they did during the pandemic and
then they start trimming people and they
typically trim the bottom 5 to 10% every
year anyhow yeah so couple more slides
here I bring this up this is the fed the
CME fed watch so in September which is
the one on the left here this is
identifying that there could be an 85%
chance of a
50% rate cut and I thought it was
interesting because if we take a look at
this to a week
ago right I’m sorry sorry let me go back
a month ago there wasn’t a huge it was
less but my whole point is you’re going
back a month ago and it was
72% this is this was before a lot of
those reports and then we look to the
right this would be the November meeting
they’re looking at a 70 basis cut by by
by I’m sorry November between now in
November 75 basis points we could
potentially be down in election year I
just don’t see that happening no and
then just very quickly to wrap up on
this and then you got uh December and
then you got January just wanted to show
the next four meetings y basically this
is showing a 43% Chance by December for
a basically a SE actually it would be a
yeah actually a 150 rate cut and then by
January you’re looking at a 40% chance
of a
175 rate cut yeah now if we cut rates
that fast there is a lot more issues
going on
than yeah yeah so actually and look
folks we need to just preface this
because Jeff and I have always had some
fun with
this November and December of last year
they were expecting depending on who you
listen to four to six Cuts this year yep
next year they were looking at four to
six Cuts okay we didn’t have we haven’t
had any and we’re already in August yeah
may have one or two this year and
they’re looking at least four for next
year again these are all Futures
projections speculation right this
doesn’t mean it’s going to
happen and even at an
85.5% certainty this is still
speculation yeah and unless the numbers
even more so precipitously come down and
we got the polit political uh slant
involved here I don’t think it’s going
to happen before the election thoughts I
I honestly and if you look at history
that I don’t ever remember a time during
a presidential election year where the
FED cut rates anywhere less than six
months but before an election because
they just don’t want to be they want to
be completely apolitical and they don’t
want to be seen as helping or hurting
either side in those cases although
they’re not political they are because
it’s like they don’t want to be involved
in politics at all so we’re just not
going to do anything which could cause
even more Havoc as we go in little bit
of History so it’s funny you said that I
just saw something about a week ago that
in 92 George HW Bush there was at least
four Cuts prior to the presidential
election okay and he still blamed
Greenspan for not cutting more and
sooner because he basically said that
the effects of this were positive six
months after the election sure so there
was at least four Ray Cuts prior and
then also
vulker in
7879 was being or 7980 was being
pressured to do rate Cuts but he didn’t
because he said that it it would have
been political yeah so anyway we got
stuff going on both sides there yeah
that’s amazing no matter what happens
one or the other is going to complain
about it so so it it’s really would
they’re damned if they do damned if they
don’t but I I would prefer they just
step back from the political world and
go okay we’re going to follow the
numbers which I hope that’s what they’re
doing the people that it’s so funny
watching the market drop and then people
go oh I they’re gonna probably have an
emergency rate meet they’re not gonna
have an emergency meeting that’s gonna
freaking put it into more of a free fall
yes at that point so that’s not gonna
happen so
it it may be the right thing to do but
the psychological and the mentality is
sell yeah that’s it gonna happen yeah
because they they told us it’s gonna
happen in September and if they do it
sooner then it’s got to be way worse and
then the market I think the computers
have need more Prozac now than the
humans do because they go just crazy at
this point folks I hope you enjoyed this
hope you got a little bit better view of
the world from an economic perspective
here for you that’s why we do these
shows and we’re trying to make them as
short as we can sometimes we get on to
movie topics and we don’t but we’re here
for you please let us know if you like
this give us an up vote and share this
with somebody else and make sure you’re
a subscriber because we put these out on
a very regular basis now while the
Market’s coming down so thanks a lot and
we’ll see you guys here the very next
time