PODCAST: The Economy Is Holding On… But Pressure Is Building | COT 147

Hello everybody. Welcome to another episode of the sense of things with Ron and Jeff. It is the beginning of summer.

We’re after Memorial Day. We’re into the dog days of summer at this point and all kinds of crazy stuff going on. So today we’ve got this this week in history.

We’re going to talk a little bit about Ron’s got some stuff on spending more how Americans are spending more on gas.

We’re going to follow up on a story from two years ago about a very famous restaurant chain. We’re going to talk

about bad breath, not bad breath, but bad breath of the market. And we’re going to talk a little bit about

momentum and the CPI index. And I’ve got some stuff on some economic numbers that dropped today. So stay tuned. We’ll be

right back on in just one second. Hey everybody.

Welcome to the show, Ron. How are you, my friend?

Good morning. You are correct. As soon as the Indianapolis race goes, you know it’s the start of summer. And one hell of a race, by the way. I watch like in and out. Watched it most of the day.

Probably the coolest finish of any Indianapolis 500 I’ve ever watched.

couple close ones. But the exciting thing about that was the change of leads like they had a couple of years ago. The last three laps they kept changing, but

they have the point of view from Rosenquest’s car. Yeah.

Those last three laps and you’re just thinking, why was he that much faster than his his teammate? And number two,

he passed him on the outside. Like that’s why the other guy took the inside. I don’t know. It was just amazing. like had he got that much more

speed than his teammate and was able to pass on the outside like that.

It was just an impress. It was just a really cool race and you’re like you want to see the good guys win and that the good guy won. He’s a just I didn’t guys.

Yeah, just a genuinely nice guy and he was just very humble about it that hey, I had the opportunity and I took it and yeah, it was just it was a great race.

It was just a really cool way to start the summer out. what’s going on in history.

Yeah, there actually there was more than I expected. I’m going to kind of change these pretty quick. So, one of the great things about this, no matter what we

learned in school, still learning about how our country was formed with Congress, and I didn’t know there was

such a thing, but in 1775, interesting.

John Hancock becomes president of Congress. Congress today. Yeah.

Yeah. Yeah, cuz they there was basically only one house at that point. So they he basically was the president of the legislature effectively. But 1789 constitutional convention begins.

Interesting. You’re learning about all this stuff. 1806, maybe we got to go back to this.

Future President Andrew Jackson kills Charles Dickinson in a duel.

Uh when I got to look this up, maybe we’ll come up in history. When did they outlaw dueling?

technically was outlawed at that time, but this is jail.

No, he didn’t go to jail. No, it was one of those things where it was like it was outlawed, but as long as nobody saw you do it, it was okay. But

I I thought the best one Yeah, the best one. Yes, he killed this guy, but he also there was some other guy that they

were running against that he was running against I think for president that insulted his wife and he beat the living crap out of him with his cane which I thought was hilarious.

Saw it on Pawn Stars years ago. They actually had a dueling kit which was it was in a fancy case and it was two guns.

So this way they were equal caliber and everything else. So just I don’t know what was going on back then but 1844

Samuel Morris demonstrates the telegraph with message what had got wrought. Interesting.

1859 Big Ben starts ticking over London for the first time. Interesting.

1883 Brooklyn Bridge tell you I’ve watched two or three documentaries on the making of the Brooklyn Bridge.

That thing is going nowhere. I mean, they don’t forget about steel and everything else today. That bridge is going nowhere.

1911, first Indianapolis 500 held. There we go.

1921. There’s an interesting couple documentaries I saw. Oh, yeah. The Tulsa race massacre begins. This is when all

obviously all the racists didn’t like that black people were actually doing well and had thriving businesses and they burned that entire side of the tie

side of the town side of Tulsa. Yeah. And that was like that was basically Black Wall Street back then, too.

Yep. That’s Here’s the interesting thing. I don’t know if anybody actually got arrested or convicted. I probably not.

Yeah. Just another terrible partner history. Just it’s the parts we wish we didn’t have to remember, but we have to remember.

1930, New York Chrysler building is completed. I actually think in my opinion, it’s probably the best skyscraper in New York City.

It’s the coolest looking the Empire State Building and everything else. It’s ornate and just the way it looks. It’s It was well ahead of its time and it still holds up today.

Yeah. And it’s beautiful. It’s just a beautiful building, period. I’ve always thought it was prettier than the Empire State Building. here.

1937 or first. Everyone knows these, right? Golden Gate Bridge opens in San Francisco. That is another bridge. That is just a marvel. I’ve gone I’ve driven

over it. But even when you just see aerial photos of it, it’s just it’s a beautiful bridge.

When you we went and visited the fort that’s right at the foot of you know on the San Francisco side of the bay at the foot of it. You’re standing under and it is just massive.

Yeah. So, I didn’t know this, but 1939, ship carrying hundreds of Jewish refugees, fleeing Nazi Germany is turned away in Cuba.

I did not know. I know that obviously a lot of people fled Germany in the late 30s, the persecution, but I didn’t know they were going to

Cuba. I know they were coming here. They were going to other parts of Europe.

Yeah, they were going Actually, they went to South America. They went to a lot of places they did not know about Cuba and I didn’t dig deep enough to find out why the hell they turned them away.

Yeah, it’s just where not the biggest of islands and not a whole lot of places to take in a bunch of refugees.

Here we go. 1949 Marilyn Monroe poses for Red Velvet N session. He’s paid $50. Would you pay $50?

Probably.

Yes. And who ended up buying those photos and starting a m his first magazine? Hugh Hefner. Playboy magazine.

That’s correct. 1953. Post cover of Playboy magazine. She must have been desperate for money. Yeah. And what was her real name?

Oh, Normmaene. I can’t think of what her last name.

Close enough. That’s right. You got to remember the Alton John song.

1953. Everybody [clears throat] and Tenza Nor reach ever summer. And if you see the way they go to the summit today, they bring 100 people.

Yeah. Back then they did it on their own.

Maybe with two dudes, just two dudes going to the top.

Barely any minimal oxygen tanks. Just it’s just old school.

Not that it’s easy to do it today with three or 400 people, but back then they didn’t know what court to chart. They

didn’t have maps. They didn’t have It’s amazing. 1957, baseball owners

allowed Dodgers and Giants to move. I don’t know if they really allowed them or if Bridge, Ricky said, were gone.

By the way, they couldn’t truly make that move to LA unless the Dodgers moved out because they would be the only team west of the Mississippi.

Yeah.

1961, JFK asked Congress to support the space program. Man, that was a lot of stuff this week. Yeah, I kept going here. I kept adding.

1977 Ace I remember going actually it was the only movie it was the only movie being

young that I saw twice in a week Star Wars theaters and is the first mega hit ever I it was I saw that movie with my dad in

the in the dollar theater of all things but I remember my dad telling me it was the first movie we ever went to that I didn’t ask him any questions during the

movie 1994 Pennsylvania man buried with his beloved Corvette dead. He was 71 years

old. He was cremated and his ashes were put in the corvette and it was buried. Okay.

And unfortunately the last Oh, check out two more. So 2005, the identity deep source who helped unravel the Watergate

scandals revealed, Mark Felt, who was number two at the FBI and he had a little bit of vengeance here. People

don’t know the backstory. When Jay Edgar Hoover died in 72 or 73, Nixon appointed

somebody else other than felt and felt slighted.

He basically was sharing information to basically I don’t want to say bring Nixon down, but in lie of him not being

appointed director, he felt that basically he should share. I’ll take the booger down. One of the all-time great movies, too.

Yeah, actually it is just one of my favorites. Unfortunately, the last one, 2022, 21 [clears throat] killed in a valdi. I’m not going to really put a lot

of school shootings on this, but yeah, this just shows the hypocrisy in America and everything else. So, terrible.

Unbelievable.

All right, so here we go. So, this is a couple of weeks old, but gas really hasn’t come down that much. Americans spent 125 million more in one week than

they did in the prior week. And this is kind of kept up there, and we’re going to have another slide in a second.

really just kind of showing how gas is really eating into the average consumer’s wallet and it eats into everything because it rolls downhill.

Absolutely. And then we talked about this two years ago. I had a slide on how they lost money because they gave away

too much shrimp and there was a couple of other factors to it and then they went into bankruptcy and now the party

is over. They’re officially closing their last location and that was it. And I think there was 133 left and this was the last one that they’re closing.

Wow. An American icon gone.

No more unlimited.

McDonald’s is a bit of an abermation if you want to look at franchises and restaurants, but they did it and ran it corporately,

right? Uh look at remember Chi-Cheese was the unbelievable. who had be Boston chicken that became Boston Mar. These

things were hot for two, three, four years.

Then things change and then they all to go, we need bigger profit margins.

And Darden also closed all at the same time that they did this, they closed all of their uh Christ, there’s a chain. We used to go there when I was working for

Fidelity. We used to go there after day or after work every day. But they had another kind of fish tiki restaurant

type thing chain that that they closed pretty much everywhere else and then they were just down in Florida and they’ve just recently closed all those.

So yeah, Darwin’s kind of a lot of restaurants are closing. A lot of smaller chains but they can’t make it because of labor cost and they’re not

getting the margins. you want to give everybody $30 an hour because they need a living wage. And I’m like, but they get tips.

They don’t pay tax now.

All right. So, S here we go. S&P equal weighted index versus market cap weighted. So, this is like the RSP

versus SPY. And what we see here is the equal weighted is outperforming market cap. And I just think it’s very

interesting as far as how they’re outperforming, but you could see where the breadth is going in the SPY or VU VO, right? 40% are the top 10 stocks.

Yeah.

The other 490 are irrelevant. How many times have we talked about all this?

It’s amazing. It’s really And I thought it would start to reverse a little bit because we started to see breath expand a little bit, but it’s just it after

it’s like we’ve got this animal spirits going again. And I think you’re going to talk about momentum here in a minute. It’s just it’s a momentum driven market.

You got to make sure you’re citled up some way in with that group. Otherwise, you’re left behind.

AI, chips, storage. That’s what’s driving the market. It’s baby.

J&J. You’re not seeing the consumer staples driving the market. And with momentum, here you go. So, here’s your

momentum stocks completely out of control, strapped themselves to a rocket ship with extra tanks of rocket fuel in

the last couple of months. I got some clients in these stocks that are like, “Ron, when’s it going to go down?” I’m like, I don’t know. And I don’t even know when

the right time is to sell it because some of these things are in taxable accounts and they’re going to get whacked in taxes.

Even gains.

Yeah. You can’t let the tax dog wag the the dog or the tax tail wag the dog. We I’ve been slowly we’re just raking up so

much money. It’s okay. We’ve been starting to pull back. Just pull some cash off. We’re still invested and we’re still making good money in it, but I

just I know it’s going to reverse at some point and we want to have some cash to be able to do that. So, I think it’s a good time to do it and not worry about Okay, taxes. Yeah, taxes are taxes.

We’ll have to deal with them. But I’d rather people pay taxes than have losses in their accounts. I agree. What do you got?

All right, quick stuff. You covered so much. So, let me just quickly share this.

All right, so economics, for some reason, the Fed and the economic people in the government just started dropping

all kinds of stuff today. So, we had multiple things come out. I think one of the best is durable goods orders. We

talk about the cost of things and how bad everything is and the cost of fuel and everything else, but durable goods orders came in off the charts up 7.9%.

And year-over-year or X transportation still up 1.1%. So, we’re ahead of the

game there. Now, GDP came in a little lighter than consensus. So, 1.6%. I don’t think that’s anything out of the

ordinary. We’re we’re I think experiencing a little of all of this fuel is starting to roll

into the rest of the economy. So I think that’s slowing up a little bit. PCE came in lighter than on an annual basis came

in lighter than consensus of 1.6 a little lighter than the prior read on it which who knows that could come back to get you. Personal income and outlays.

Interestingly enough, personal income and outlays over month over month was flat and expenditures month over month right on where the expectation was.

Pretty much everything else was right on with expectation. We are running PCE year-over-year 3.8. So, it is hotter

than it has been. I don’t think that’s any big surprise quite frankly. We just are experiencing that. And then last but

not least, and the gift that keeps giving. Government shutdown, new home sales, we’re still behind. And I think this is the most

telling number of anything. This is I think all the stuff going on with the economy and everything else is really

paralyzing people in buying houses. And I do a podcast with a good friend of mine that’s a realtor and it has just

been a rough spring season. and this is usually their best time and it has been a rough spring season and I think his comments were people are just they don’t

know what to do so they’re just not doing anything at this point so I think this is the mortgage rates are 68

yeah mortgage rates are up people are uncertain about things the weekly jobless reports are in line with what

expectations are hovering in that 610 to 615 range as they have been so there’s nothing outlandish there. But I think

people are just hunkering down right now and saying, “All right, we’re just going to wait this out and see what happens.

See if there’s any kind of a recession later in the year.” That said, if you’re buying a house right now, it is a buyer market and you can always refinance

later. So, it is really a good opportunity to buy. I know here in the Austin area, it’s a fantastic opportunity to buy because we’ve seen

about 20% drop from the highs here in the Austin area alone. So, you know, it’s just if you got the money, it’s the

time and if you got to move, you got to move at that point. It’s the way I look at it.

Yeah. Unless you’re being forced to move for whatever reason, people there’s just not enough there’s not enough inventory.

There’s it costs too much to to finance it. So, people are just waiting.

Yeah. This is an opportunity, especially with with new home sales down as much as they are or trending down. If you’re

buying a house right now, there is no better time than to buy a brand new house because the builders, they want to

get this inventory off their books and move on to the next project. So, you can find some really good deals and really

phenomenal deals on financing if you do it through the builder at that point.

Still hire a realtor because they’ll they’re going to watch out for you. But definitely look at new homes. People think,

“Yeah, but new home sales were down, too.” That’s what I’m saying, though. It’s a great opportunity to buy because they’re going to wheel and deal with you because

they want to get these things off their books at this point.

And the spring season’s over. Yeah, once again, great time to buy.

The only the only people I’m not going to say the only the chunk of the people that would really be buying in the next two months are people that have kids

that are minors that want to make sure they move before the new school season.

Other than that, unless you have to move, you’re not moving.

Yeah, you’re probably not. I look at mine. I’ve got a 2.75% mortgage. So, I really have no

interest in moving. When we make our move the next time, it’s going to be to a much smaller house, which I’ll pay cash for. So, I that’s really not an

issue. But, I’m just waiting for home prices to start amling back up a little bit. So, that’s going to take a little bit of a drop in in interest rates to

get that market kind of kicking up again. But, hopefully, we’ll see that.

And we’ll see doing a little analysis into the Fed balance sheet right now.

And I want to take a look at where that’s been because it’s it I just caught it today and I want to see what the trend has been. It’ll be interesting

with the new Fed chairman to kind of see what direction he takes things.

Hey, listen. The bets are going that the next rate move will be up, not down. And he’s Trump he’s Trump’s personal pick.

Can you imagine if he basically agrees to increase rates? Is Trump going to come up with a nickname for him?

Yeah. I You know, and this is the argument I’ve always had with the Fed that they only see things from one point

of view, which is interest rates control everything.

That’s not If you jam interest rates into the economy, that’s not going to bring oil prices down. And that’s not going to What you could do is lower

interest rates and actually speed up the economy a little bit and get more production out there, which will then bring prices down. That’s the argument I

have. It’s really a dumb argument when you hear them say, “Wow, we have to raise interest rates because inflation’s up.” Inflation’s up because we have less

stuff. If we create more stuff, we’ll bring prices down. So, I Yeah, but inflation’s going up, not down.

I get it. But if you produce more stuff, supply and demand, if you have more supply, your prices are gonna go.

I don’t think lowering interest rates a quarter of a point is going to spark major productivity in manufacture.

I totally agree with you. That’s not and raising them a quarter point ain’t going to do anything either. So I think they’ve got to just wait this out and

let because as soon as things calm down in the freaking Straits of Hormuz, the freaking oil prices are going to drop

like a rock. and that but that’ll take time to get out into the economies.

I’m on the other side of that. I knew this was not going to be quick. Military operations were not winding down in two

weeks. And based on everything, let me tell you, they are digging in their heels. This is going to go through the

summer, folks. I’m sorry, bud. I You know me, I hate both sides. And this is not it’s not going to end quickly, and it’s not going to end pretty.

I agree. I do agree.

There was a tanker that just went through the straight of Harmuz that was waiting to go through since February. Yeah.

Three months.

Once again, we can good and different how this gets resolved. Just the backlog to catch up. How long?

There’s what 1500 ships that are sitting there that have been sitting there for months. So, yeah, it’s going to take credit. It would it’s going to take a

month just to clear all the ones out plus the ones that want to come in because you can’t have everybody go at the same time. You’re only going to be able to get a

My last quick point and then we’ll move on the next week which is look this has got to get resolved with

two major factors. One they have to give up their enriched uranium and number two they are not allowed to control the

straight of Harm. If we give into either one of those, this was a waste of time, the world will come against things up.

And I would say even on the second side of things, the Straits of Hormuz, I think, are one, you can’t let the crazy,

you know, have a nuclear bomb because then they’ll hold everybody hostage around the world. But two, we cannot

allow them to just go, “Oh, we’re going to just put a tariff on everybody coming through the Straits of Hormuz.” that that’s the basis of all maritime law.

You can’t do that. We’ve all agreed on that before this. I never heard of that. But we’re not paying attend that kind of close attention either.

But again, they’ve never done it before.

Let them have control. Period. So if we give in even a little bit, then this was a waste of time. They’re going to lose the midterms. Everything’s going to fall apart.

Yeah. And what’s to stop China from doing that and the the Chinese straight in between them and Taiwan? What’s to

stop some crazy [clears throat] but not truly they’re acting up there but they’re not stopping commerce and

everything else. So we just cannot allow they cannot be allowed to do this. So that said enough for the week of of

crazy people. Folks, as always, please subscribe to the channel. Make sure you give us a little up vote there. That always helps too. And we will be here the next time. Talk to you soon.