Transcript:

hello sense of things it’s Jeff and Ron here for another weekly episode and it’s

a lot of fun this week because we are at the 54th anniversary of the moon

landings Ron how you doing buddy very well Jeff yep actually uh growing

up I was a bit of a rocket geek so uh you know I was uh barely a year old when

uh when The Rock when the moon landing took place but over the years when you

kind of learn about the technology from then versus the technology now I mean it’s almost a light year difference no

pun intended absolutely well and I mean I for me too you know we were talking

before the show that you know I mean it was always the thing for me too I mean you know we grew up in the the space

generation and you know really we we grew up in a world where you know it was

the first time we man had stepped off the planet and stepped onto another planet so uh really cool stuff and a lot

of I think a lot of amazing things came out of uh the space you know world I mean we we have velcro

now we have you know all the Silicon chips it was another one right silicon

chips uh Tang I was just reading a little thing about this that Tang was uh

you know became the biggest drink back then it’s just absolutely awful freeze-dried food yeah freeze-dried

foods um I’m sure that was the good one but that’s yeah but it is what it is right I

think uh military MREs came out of this too but uh that that was not something not fun to talk about well we’re talking

about technology travel space travel I just saw last week

Back to the Future four oh goodness is in production oh goodness now God bless

Michael J fox I’ve always been a big fan and of course why you know why would

Terrible Things always happen to good people I don’t know how he’s going to get through that movie in his condition

but it should be interesting I have no idea what kind of a story line they’re going to be hopefully they don’t recycle

like two and three and kind of have all the common threads um and you know it’s just going to be

another Horrible sequel but you know hopefully hopefully it’s not an Indiana Jones four or five or whatever you know

what did you see we don’t have to go I didn’t see it yet but I did read the reviews are awesome mixed but mostly bad yeah

it’s just awful I mean yeah I just look at it as like okay I don’t want to watch

a movie I uh a hero of mine through movies all these years and I loved every

movie that that was made except for the second one was kind of crappy but but I loved all of those and I don’t need no

number five being the awful one that’s like oh I’m in retirement it’s like Rocky five same thing you know there are

like nine Rockies yeah I think they’re I I’ve lost track of them now now you’re on decreed and all those things but you

know you you looked at it and it’s like man Rocky one through four everyone was great it was interesting they had

interesting characters and then five is just the worst movie that ever you know

Sylvester Stallone ever made including over the top um yeah

look if the Rambo 4 comes out I think they should just shut down the theaters at this point uh yeah well I think all

these guys are like trying to make their last hurray he might be able to pull it off I mean he’s still in in shape I mean

Harrison Ford looks like an 80 year old man at this point well think about it uh

Sylvester Stallone’s gonna be uh 77. yeah yeah well he may have already turned I know this year he’s turning 77.

he’s still in great shape I mean I see him all the time on TV he’s in great shape human growth hormone is awesome so

yeah maybe maybe he knows something we don’t I guess

what do you think about the market right now uh July is still uh July

yeah your prediction or thoughts I mean definitely July is just Off to the Races

um The Mighty Seven just keep being mighty uh it’s funny I was doing a little bit of research for an article on

you know the Mighty Seven and man you just you look at the stock charts of all seven of them and they’re all the same

way straight up uh with very little variations each day so and actually the

one thing that’s impressed me about some of this forget about the the lack of breadth although that’s been coming up

yeah for summer time the volume numbers have been above average yeah above

average which is shocking right we’ll see what happens in August because that’s the big vacation month especially

for Wall Street but you know I think I I think the the different yeah it is the the trading month you know where Wall

Street kind of goes away but I think so much trading today is done via computers

that I I just don’t think it really matters I mean computers don’t take a vacation or take a break

um you know and most of them trade off the headlines and what’s going on so I mean I honestly think the the humans go

and hang out at the beach in Long Island and everybody else just you know the computers just keep on rolling behind

the scenes well it’s very much of a cascading effect right we’re going to talk about this in a second that you

know one of the Tailwinds has been employment yeah and if people are working

and they’re making money and they’re taking money out and putting it into the retirement plan that money is getting

sent into the retirement plan and then the computer is then applying their contributions yeah so that’s steady flow

of well we’ve got to keep buying this fund we’re putting money in the fund and those fund managers got to use it to buy

those stocks so the train keeps chugging as long as employment stays I mean it

will and figure it again as long as all these people are employed they just keep putting money you know like you said put

money in putting money put money in and it’s going into largely a lot of uh you

know I mean you figure most of the major funds the big large funds are probably invested in the The Mighty Seven and

they just keep pumping money into them and and they keep going up so well I’ll tell you what I I think I got a couple

of uh slides here the first slide is kind of a carryover from a prior other a

couple of other podcasts that we’ve done talking about the consumer two specific things yeah um obviously one that

employment is good but the interesting thing is is that credit card balances are at an all-time high uh let me let me

make sure you can say is it you got the slide version of this yeah hang on it’s coming up uh yes full screen right okay

full screen so I thought this was interesting because this goes back 27 28 years okay look at

the end we’ve always talked about how interest interest rates on credit cards are like mob rates right 15 18 20 plus

percent look at where we are right now on

interest rates on credit cards wow what is that 22 22 average

how can people even afford to make the minimum payments I mean they’re going to be paying off that dinner they had three

weeks ago for another three or four years yeah well I mean I I this chart is disturbing

that balance it yeah if you just pay the minimum your balance basically is going to quadruple in four years

it’s it’s insane one of one of my investment themes for several clients has been digital

payments uh electronic payments whatever because how often do you take cash out of your pocket today right mostly

everything is on a credit card we want our points for travel or purchases of course Amazon’s hooked in everything so

you could use your points for Amazon stuff but but at the end of the day like

people are using cash less and less sure so these credit cards are just I I don’t

know how the government hasn’t stepped in other than we both know and I know we’ve talked about this before these

credit card companies have are spending Millions tens of millions of money with uh lobbyists with the government to make

sure that they have free reign on what they could charge I mean where’s the consumer advocacy groups where is you

know I mean if if any other business did this they’d be considered Loan Sharks well yeah and I mean it and you’re

you’re you talk about you know oh all this stuff that’s hurting the the poor and all this well this is hurting the

poor way more this is considered inflation if you want to think about it right this is beyond

it higher amount for goods and now they’re paying that much more if they’re carrying it over so how are they ever

going to be able to get out of that dark hole they’re not I don’t know and over a billion dollars now in carryover bonuses

at an average of 22 percent yeah scary it is scary and you flip on the

student loans in another month and you know now that’s gonna just on

top of all that you know do it and looks like the government’s trying to you know or the administration’s trying to do

another end around using another way of you know okay we’re gonna forgive all this debt I mean it’s it’s just but I

think what he can do as an executive order um is like a fraction of what they wanted to try and pass through Congress

well you’re not justifying it I’m just saying it’s a fraction but I don’t think that’s going to put a dent in the grand

scheme of things when a good chunk of the people that have as much credit card debt as they have now have an extra

three to four hundred dollars they got to put on top of it I mean think of it the bankruptcies are going to Skyrocket

oh that’s probably going to happen next year sometime not right away yeah and I mean I you know my my take on you know

from an economic standpoint we’ll talk about that in a little bit but I mean my take on the economic standpoint I don’t

think we see a recession this year I mean now I’m everything I’m looking at is probably in 2024 you know early in 2024

we might see a recession at this point I just don’t it depends on how you’re defining recession because the way the

economy the economists do it two straight quarters of negative GDP growth that’s kind of BS because if the gdp’s

at three and a half yeah and then it goes to three four to three three does that mean we’re in a recession yeah you

know you gotta I think the employment number is a bigger indicator I think so we are with the recession than the GDP

today well and that that’s going to have the the carryover effect to everything else I mean we’re seeing a little bit of

and and you know I know you’ve got another slide or whatever but I mean we’re you know we saw retail sales this

week and they were certainly well below consensus kind of at the bottom end of the range you know so we’re starting to

see the the cracks in in the consumer a little bit more which has really been I

mean all year long they’ve been just blowing and going and and that’s part of the issue is look

even the best economists in the world don’t freaking know when we’re going to be another session or when the pullback

is so to time this thing is tough and I’ve had some tough conversations with clients this year because of the first

half movement I’m like look six months does not a year make I said you know for

the most part whether whether we get a significant pullback the end of this year or the beginning of next year it’s

going to happen so probably a good thing to do is kind of initially look at some of the Tailwinds right yeah we have a

good strong consumer despite the retail numbers pulling back they’re still spending money right traveling

Hospitality spending has surged and stayed strong at least through the

summer people want to get away get out you know you know completely blank their

minds on what’s going on Albert they want to have a good time they’re take they’re doing it during the summer time low

yeah and I think globally this year is really the truly first year without

covet being a major factor you know where it’s in the news and everything else you know even 2022 which was really

that first summer of people being able to travel I mean I traveled overseas and they were still a little pinky about

covid and stuff like that and you know this is the first I think Global summer where everybody’s just like I’m gonna go

out and enjoy myself and and be out there and it started in May it didn’t start after Memorial Day it started

April May time frame so it should be interesting I thought some of the other numbers I was looking at was large

businesses are still hiring not at the pace they were I think what they’re

doing in my opinion whatever the hell that’s worth at this point is I think they’re upgrading key positions I think

so they’re still hiring and they’re upgrading because small businesses um yeah they are trying to hire but many

of them are are not doing it at the pace they once were and I thought the other big thing was I believe now it’s five

straight quarters of negative earnings growth yeah the earnings were better than expected

but had slower growth from expectations and I think a lot of these companies you know how it is figures lie Liars figure

is that they were lowering expectations to a point where they know they could jump over that bar but it was still a

lower expectation from where they were 6 12 18 months ago well I mean do you

think too for I mean a lot of businesses you know I know we probably are going to see at least one more interest rate

raised this year maybe to do you think I mean I don’t yeah and

we’ve had this discussion I don’t think we’re going to see an interest rate drop for quite a while but what are your

thoughts on it just stabilizing so the businesses actually have the ability to somewhat predict what they’re seeing

down the road well I look go back to some of our podcasts we did in April and

May when they were talking about oh the First Rate cut Could Happen October November or December we were laughing we

were absolutely laughing because wait wait a minute we’re not done raising and we were absolutely correct in may we

they paused in June but we said hey look it could still be one to two more what did the FED come out and say one to two

more and it’s like an 80 better than 80 percent chance they rate they they uh uh hike next week the next meeting is in

September I don’t know if they’re going to do another one or not my point is the Fed has been telling you higher for

longer even if they don’t do another rate hike after next week yeah it’s gonna stay where it’s probably going to

be there for nine to 12 months unless we get some quite frankly domestic or

geopolitical uh event happen right it will stay higher for longer that means

the banks will be lending less so I guess that’s a good segue to the next part which is all the headwinds right

most of these we’ve talked about to add nauseam uh you know over the last three

or four months but small businesses bankruptcies have spiked the big one

that I don’t think we’re going to see pan out for a few years is since the commercial property occupancy rates are

way down especially in major cities many of their big payments or maturity on

those loans are coming due in the next two to three years yeah they’re not getting the cash flow

are they going to just leave that property and the bank’s going to take it over because we all know the banks don’t

want the property right they want the cash flow yeah well and I think the interesting thing

if you looked at you know I mean most of the the big Bank earnings I mean we’ve

just seen a bunch of them this week Bank of America and several I mean they look really good and they’re you know of

course I think they’ve been a net positive as far as inflows of capital and everything else or or depositors

from the the regional Banks absolutely do you see the numbers on uh on uh

Goldman Sachs I mean they missed huge and I think that’s more internally issues that Goldman Sachs uh but you

know commercial loans and and their commercial side of their business really got hammered

um on top of their their uh I think they took a massive write-off on their uh commercial or their uh res uh like

individual loans or personal loan type stuff well I think I did see a chart on a

Goldman Sachs as far as their earnings growth year over year yeah it was the worst since code forget about Kobe but

it was the worst in like 15 to 18 years um and Goldman Sachs are supposed to be the smartest ones on the street next to

Blackstone but um yeah they can’t figure out how to make money

yeah Blackstone got hammered this morning too yeah they did what they did but you know what

they both of those companies without giving any advice to people both of those companies will figure a way out

there’s just no doubt you know they’re the Silicon Valley of the financial uh of Industry they they will figure it out

especially Blackstone because a lot of their stuff’s in property they’ll figure out how to refinance with the banks you

know whatever that whatever it is they’ll they’ll figure it out but we’ve talked multiple times about the student loan moratorium ending next month credit

card balances higher fed interest rates and tightening and all the banks so yes the banks are lending but unless you

have like Superior Credit and a long-standing relationship with that bank the banks are going to do less and

less loans and or unless a business is desperate for money they’re going to pay

higher than the average rate that’s just the way it’s going to be yeah earnings are flat to negative for the fifth

straight quarter the bond market is always where it always has been where the smart money has been uh there’s

still flashing recession signs look at the two and ten year over it’s over a one over a one point difference again as

of this morning yeah uh we already talked about the Fed rate hike uh it’s expected to say higher for longer right

we already echoed all this stuff and then here’s the big one and this is now what finally some of these people that

had they’re coming to Jesus moment about uh the you know the market just going straight up is the fundamentals are

finally looking stretch well they were stretched three months ago yeah right there’s been Pockets actually there’s

still quite a few um quite a few Pebble companies out there that actually are good value right now

you know they haven’t been stretched but you know the most of what’s been moving the market up their fundamentals are

absolutely stretched their PES have gone up almost 30 to 40 percent in the last

six months so it can’t continue it’s got somebody’s got to either say stop adding

money or take some money off the table right it’s got to happen but we obviously know the inflows from

retirement uh uh plans and everything else will keep a lot of that top seven top ten stocks up what do you think on

the headwinds because we’ve talked about some of these multiple times but what do you think are the top two or three that

you think may be the big Catalyst you know I think the The

Lending from Banks I think that’s going to be it they’re they’re I think there’s

a spillover effect so yeah the lending from Banks which is affecting small business bankruptcies you know because

it’s just if you don’t have access to Capital and you need it and you can’t find a method to get it or if you get it

it’s so expensive you can’t afford it um you know I think that’s a major effect

um I think quite frankly you know and and we’ll be talking about this more I’m actually going to interview somebody for

the show here and then a in about two to three weeks that is working with a

company that there’s actually 71 programs in the federal government where

you can actually reduce or eliminate your college debt that are available they’ve been available for the last 30

years it’s just nobody knows about them and they’re impossible to get unless you have somebody that knows what they’re

doing and his the company that he works with actually does this they basically

help people get through this so I think the administration’s ability to get anything done from the student loan part

you know and and I look at it from the perspective of okay if there’s a program available

yeah that’s fine but just doing those Mass you know okay we’re gonna get rid

of it well I mean I didn’t have school debt I went into the military and I spent five years of my life all over the

world you know living through hell in some cases you know I paid for all my

own College by myself so why should I pay for somebody else’s well don’t forget too I mean what they were trying

to pass was up to ten thousand dollars now you know somebody that you know has a

hundred hundred and fifty thousand dollars it’s not gonna put much of a debt now but you know but you know what

you made a commitment you got to pay it you know that’s what it comes down to obviously if there was a medical situation or whatever it may be I get it

but you still made a commitment well but which is another reason we all know that college education is completely

overpriced anyway oh yeah and it’s the only people that make money the professors make next to nothing it’s the

it’s the top administrators that are making it and they want that tuition to keep building buildings yeah I mean you

go on any college campus or building another building that’s what they keep doing that’s what they yeah and they need it and when they finish that one

they’ll build another one and another one another one and you know it’s it between that and the the the you know

the money that goes into the the the sports programs and everything else I mean that you know those are uh those

bring Revenue into the to the college but yeah I mean it’s it’s it’s unsustained attainable for the rate of

growth of college you know and and a government handout basically or a forgiveness of

that is just gonna it’s not gonna improve the situation until we do something to kind of get control of that

a little bit now I will say one thing in the in the college world that I do have a lot of faith in is more and more

people are looking at online programs and stuff like that and I mean

they’re not cheap either yeah and I mean I think that’s the big differentiator yeah you might you know you can go back

to school not have to have this campus experience you can work and actually do

school for some people that’s that’s a good solution and it can save a crap ton

of money for somebody so I think there’s some there’s some innovators out there that can kind of break the system a

little bit um you know I mean I I went through a program through MIT I there’s no way on

Earth I would pay the money to go to MIT but I have a micro Masters in finance from MIT that cost me probably two

thousand dollars total you know and I mean it gave me the training that I wanted at the time and that and I’m

qualified to actually go through a full master’s program at MIT why I would want

to do that I have no idea because it would cost me a fortune to do that but you know I think there’s other

Alternatives today to get an education and it’s just people have gotta you know one people have to think of that as a

business and make business decisions around it not make decisions based on you know oh it feels good or let let the

18 year old make all the decisions as far as how they how they’re going to spend their money they don’t know how to

do that yet yeah I I agree well I mean some of these economic factors eventually they’ve got

to come to a head yeah uh we can’t figure out when that’ll be but you keep adding all this up and if things don’t

improve uh eventually it’s not just a crack right

it’s it’s going to be a cascading effect where one thing is going to affect another and I I’m not wishing for it but

I think there’s but I mean I think there’s going to be a geopolitical event I don’t even want to suggest what it

would be yeah that’s typically what ends up happening is we end up with some kind of a huge terrorist event or something

else another conflict or whatever you know I think it’s going to be China yeah well I think this would be China or you

know the the whole Ukrainian situation kind of pulls more people into it and

we’re dealing with it you know because I mean I think this morning I just heard something that the Russians attacked

Odessa and destroyed like 40 percent of the the um grain that was in the port of

Odessa well that doesn’t affect us at all um it was I heard something the other

day it was actually there was a uh there was a guy on I think Fox Business that was talking about this and he’s like the

the guru of you know agricultural Futures Trading and stuff like that and

he said because you know it doesn’t really it the the Grain in Ukraine

doesn’t affect the world very much but 25 percent of that goes to China

so now you know now Russia’s just destroyed 40 percent of the grain of

which 25 percent of that would have gone to China so that might cause some hassle

between the the two players there but the majority of that grain from there

goes to Africa and you know I mean you’re now you’re talking about people

starving to death in Africa because of this and I heard an expert on two two experts on China in the last two weeks

one of them was talking about China has been hoarding grain for years and when

they’re and when many of their pop which much of their population was starving during covid they never touched any of

those grain reserves why would they do that yeah are they expecting some kind of a cataclysmic event that is beyond

their population starving that they can’t touch the grain I I don’t know that’s kind of it’s It’s

a conundrum like why why like think about it why would that happen uh it

doesn’t make any sense and their economy if you believe any of the numbers has been slowing down you know they’re

building these ghost cities just to keep people busy but do they don’t have the economic growth or infrastructure to

sustain any of it um now they’re talking about Saudi money coming in to build more ghost cities and

highways for their population growth but what is that actually doing I remember if you don’t have interesting listening

to these points of view because certainly we’re not experts on China but some of these people are able to track

this stuff and they’re like something’s going to happen well and I think the other part of it too is I mean I I think

the realization that came out of covid was how Reliant we were on China and you

know I think you’re seeing a massive shift in a lot of these companies as far as their where they’re going to start

building things I mean and that’s not something that overnight you just say okay screw you China I’m not going to do

business with you anymore we’re not going to build things there but I can see companies going all right we’re

going to rebuild our supply lines a little bit in other areas and you know I

mean that that has a that has a massive effect on them being able to employ people in China

yeah well listen I don’t wish for it at all because I think it would just have

catastrophic consequences on the world in general I think if China invite

invaded Taiwan um Europe would ostracize them I mean China’s economy would be in the dumpster

um if they did anything either supporting Russia or invading Taiwan I

mean think about how they Supply the world in manufacturing especially forget about our country Europe too and they

would be cut off I mean they would go back into the Dark Ages yeah well you become a pariah State at that point and

you know then then it’s okay what you know what do they do you know

is it a is it a Japan during World War II thing where okay everybody started cutting back on them and then they

struck out to you know to do that or you know is there an internal strife that

happens I I just don’t I think the the Chinese Communist party is just way too strong to for you know people to take

over I mean we’ve seen Tiananmen and stuff like that but that was you know they’ve always been able to put those

type of things down they have the ultimate gestapo yes absolutely

so it should be interesting well who knows yeah by the time by the time we do our podcast next week we’ll know about

the next Fed rate hike yeah we’ll be at the end of July at that point two-thirds

of the way to the summer if you could believe it um but it should be interesting to see kind of how August and September start

to pan out well I think however August and September pan out I think that’ll be the direction we go uh to the end of the

year yeah and I like I said I think from my perspective I think from what I’m

seeing reading the tea leaves right now I mean I I see the the markets still having a a run you

know going into the second half of the year I just don’t see anything stopping it right now that I can see

um you know some of the areas that I was down on like Finance you know the the financials and things like that I’ve had

a little bit of a shift in my thought process with those because I’m seeing actually really good numbers coming out of them you know what you’ve seen the

numbers out of the mega Banks yeah if you look at the chart on the regional Banks they are still struggling mightily

finally as a matter of fact I believe not there at 52-week lows but they they

are still in a downtrend yeah well but I mean you see most of the you know I

think most of the funds that I invest in you know it’s they’re dominated by the

large major Banks so the Regionals play such a small part of the you know

there’s there’s the stock market side and then there’s the the actual real world of of businesses and yes they do

most of the lending but it’s the you know people and invest in the big Banks and you know there’s a bigger difference

though with that Jeff look we know it’ll never happen one of the top Banks failing right we know that

because you know if the government came and backstopped the 16th largest and

they were a fraction of the size of the top three yeah they’re the the top three or four are not going to fail my point

is that there we you could you the the our economy could withstand one two or

even a half a dozen Regional Banks failing we could I mean it would hurt we

would worry about the cascading and uh contagion effect but if it’s widespread

it will have an effect because that means the big banks will get bigger and we don’t want that to happen yeah

absolutely so no like I said I mean I I I I don’t know when that you know we we

talked about those headwinds I don’t know when the commercial side is going to have some effect

um you know I I just I’ve not seen it necessarily having effect I think the effect on the regional Banks has been

the uh you know I think that that people were complacent they left their

money sitting in those Regional Banks yes they could make more money outside in treasuries or whatever that one

little blast in March of a couple of big failures I think made people made that look of oh my God wait a minute

I’ve got to get my money out and get it someplace else so I think there was that move and that move into money markets

and everything else that we saw but you know I think they’re gonna still be

in trouble for a while because they’re just not getting the cash inflows but the big guys are and well the other

thing that I had heard and I heard it from two different people and I can’t remember the exact number but they said

one thing that the regional banks are are significantly at risk on yeah is

they they more than 50 percent I think it’s closer to 70 80 or 70 60 to 70 or

more percent of the total loans that they have out are commercial property

related yeah they’re holding potentially negative paper

oh I’m sure they are but again that’s going to take a few years to pan out who I mean I don’t know if they’re going to

be able to unload it and if they unload it it’s certainly not going to be at fair value so that means you’re going to

have to take write-offs how much is that going to affect their balance sheets how much is that going to affect their stock

price and earnings and everything else um you know they got to de-risk well they’re going to have to take a hit to

you in order to de-risk and then at that point who’s buying that paper now what are they going to do with it you know

it’s basically just you know it’s a hot potato that nobody wants to hold yeah absolutely well we’ll uh we’ll continue

to see it and continue to talk about it so uh folks thank you for uh spending

time with us certainly we love comments please share anything uh that you guys

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very next week on Thursday