Cents of Things Episode 21 ===

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Jeff Kikel: Hello, sense of things. It’s Jeff and Ron here with another weekly update on

what’s going on in the world today. We’ve got a lot of information about economics that

we’re going to cover. A little bit about the markets again, and coming out of the summer

months, we’re going into the labor day weekend in about a week here.

Jeff Kikel: And we certainly want to make sure we understand how the summer is finishing

out. Ron, welcome to the show, buddy.

Ron Lang: Good morning. Yeah, actually, we got some good stuff just from the past week.

And then next week should be even more fun to see how the markets and geopolitically

the Jackson Hole speech is digested tomorrow.

Ron Lang: I think it’s a big nothing burger. But it should be interesting to [00:01:00]

see, cause you know how it is. They’re going to be hanging on every word, dissecting every

word, throwing a speech into some AI window, trying to look for nuances. It’s insane. Like

we’ve been through this for the last 30 plus the Twitter

Jeff Kikel: algorithms will be all jumping all over the place.

Jeff Kikel: And yeah,

Ron Lang: it’ll be brutal. Although I think last night. Is ours is our short term or immediate

term blow off. I think we had our big short term blow off July 27th. And I think last

night with NVIDIA earnings was just insane. If you take a look through the whole markets

reversed. So I think basically people are exiting positions, preparing for a humongous

vacation week next week, and we’ll see what happens in September and October as we’ve

talked about, but Hey, I heard you found a pretty good pop culture story to chat about.

Jeff Kikel: So an interesting thing for today, an interesting stat, August 24th is America’s

worst [00:02:00] day for sick leave absences.

Jeff Kikel: Don’t know why it’s August or August 24th. It’s, we’re close enough to Labor

Day, but we’re not quite there yet. It’s the end of the summer. Don’t know. But according

to leave analysis by leave management software provider. This is the second or the sickest

day of the year. The second sickest is February 13th, which is right prior to Valentine’s

Day, which I can figure out.

Jeff Kikel: Yes, that makes sense, but I don’t get the August

Ron Lang: 24th. Maybe it’s just because it’s probably a week to go before Labor Day weekend.

There’s a lot of reasons. February 13th is probably all the anxiety of guys trying to

figure out what the hell their women actually want for Valentine’s Day, and it isn’t necessarily

chocolates, which.

Ron Lang: Sometimes pisses them off. So what can you do about that? And

Jeff Kikel: running around town, trying to find a gift and flowers at the last moment

and everything else.

Ron Lang: The other thing too, cause this paragraph alludes [00:03:00] to, it was the

day after super bowl this past year, which was a tough day for me when my Eagles lost.

Ron Lang: But you know what? A lot of people I’ve heard this for years, which is the stupidest

thing saying that the Monday after super bowl should be a federal holiday. I don’t know.

You never heard that before. I’ve been hearing that for

Jeff Kikel: years. So it depends on who’s in office at that point and who their team

is, but yes,

Ron Lang: I’ve been hearing it at least 20 years.

Ron Lang: I’ve been hearing that it should be and it’s just ridiculous.

Jeff Kikel: I don’t get it. Like I said, it was the weirdest thing I’ve seen in a long

time. Like, how do you just pick that one out of the hat? Everybody just decides to

be sick today. So apparently many of you are listening to this and we’ll be listening to

this from your sick death beds.

Jeff Kikel: Transcribed And we wish you well, and we miss you, wish you feeling better

Ron Lang: while you’re lying down with the laptop on your belly. Just hit the and subscribe

button. We appreciate that while you’re at

Jeff Kikel: it. Make sure you do that because we appreciate that. And if you’re sick today,

here’s a challenge [00:04:00] for you.

Jeff Kikel: If you are sick today. Hit that little up like button because we want to know

if you’re out there. We won’t hold it against your tell your boss. There we go. Cool. Ron.

You dug into a few things this week. So where do you kick off?

Ron Lang: We’ll get to the the L. E. I the leading economic indicators in a second.

Ron Lang: We showed it last week, but it just come out that morning and I really didn’t

have a chance to digest it. But I thought, something that was interesting because I know

we’re a bit of an echo chamber and I’ve said that a million and 2 times here. One of the

interesting things I’ve talked about was credit card balances, but I happen to have seen this

in a couple of different sources over the last week.

Ron Lang: And this was very interesting to me because. Credit card balances just breached

the 1 trillion level. It was 925 billion in December when I first posted it in my market

outlook. But this was interesting because the top graph here shows all bank [00:05:00]

credit card delinquencies, which is roughly about 2. 8%.

Ron Lang: Now, quick footnote, asterisk. In the last two weeks, many banks, both regional

started about what, two, three weeks ago were downgraded. And some of the large banks were

downgraded. In addition to, we talked about this before the U S credit briefly downgraded

to double a plus. So here’s something interesting.

Ron Lang: If you take out the top 100 banks. The credit card delinquencies go from 2. 8%

to 7. 5. I know when we spoke about. The credit card balance is either approaching or about

to breach or breaching the 1 trillion limit. And just thinking about what that, what the

amount of interest that these credit cards companies are collecting.

Ron Lang: And if member, we showed that one graph about [00:06:00] three podcasts ago,

that the average credit card interest rate went from. 21, 22%, it jumped to an average

of 26 to 28%. Now add in the delinquency rate on that. And we’re in deep doo here. Yeah.

I just don’t see how this continues. I can’t see how many of these banks, what are they

going to do?

Ron Lang: They’re going to write off these delinquencies. Are they’re going to wait for

them to go to bankruptcies and then eventually wait, three, five, seven, 10 years for those

delinquencies to pay off. And also I don’t understand this. Maybe you could help me get

to the bottom of this logic.

Ron Lang: Why is the delinquencies on the non 100 top banks almost five per five percentage

points higher than all the banks aggregate, which means I, that the top 100 banks are

under. 2. 8% probably under 1% which also means [00:07:00] the non 100 banks have got

to be over 10%. Yeah,

Jeff Kikel: well, and I think, the biggest thing is, I think there’s so much competition

in that industry that You know, you’ve basically got those top 100 banks.

Jeff Kikel: That’s the big money center banks. And I would include the capital ones in that

area, but you’ve got so many online banks now that are out there and they’re issuing

credit and they don’t really do mortgages or anything like that. They don’t do commercial.

Commercial loans and all those.

Jeff Kikel: So that’s really the only opportunity they have to make money there. So that’s going

to be a, I would say, a larger portion of those non 100. Money center banks, this is

basically where capital 1 came from. They were a non entity a few years ago, and then

they just went crazy with.

Jeff Kikel: Focusing on okay we’re going to, we’re going to make ourselves what I would

consider a little bit more legitimate. By opening local locations and [00:08:00] all

that type of stuff, and they really became the top of that what I would consider lower

tier debt. That’s out there, where it’s very high interest that they had very easy lending

standards.

Jeff Kikel: And I think a lot of these are just a lot of the Internet banks and, non

traditional brick and mortar type banks that are out there that are issuing credit.

Ron Lang: This is what I’m trying to digest here. And there’s no way we would ever get

it right. We’d probably have a better chance of throwing a dart against the dartboard to

figure it out.

Ron Lang: The gray shaded areas are when recessions occurred and you could see when there were

spikes in the delinquencies, that’s when recessions occurred, we could, you could see that on

the chart here. Yeah, we’re higher now than we have been in 30 years. My point is. What

is the timing of this lag effect when this blows up?

Jeff Kikel: But you’re looking at we’re higher in the non [00:09:00] US or the non 100 banks.

We’re actually not higher in the big money center banks, the top 100 banks. We were actually,

yes, it is peaking up. And I think that is a concern. I think it’s a major concern that

the only thing that’s keeping people alive at this point is that there’s lots of jobs.

Jeff Kikel: That are out there that dries up and I think we’re in a major issue when

it comes to that. And that’s going to affect. Not only, financials and the banks. Down the

road, but it’s also going to affect mortgages and the real estate market and all. It’s just

a bunch of things that could potentially come as a result of that.

Jeff Kikel: But until till there’s a breaking point in the hiring side of things. I think

people are going to keep going until they can’t at this point. It looks like that’s

what they’re doing.

Ron Lang: And the only other thing I was thinking of, you’re absolutely right. Cause I’ve been

saying the same thing about, unemployment has got a spike before something significantly

breaks, but at some [00:10:00] point.

Ron Lang: Aren’t their credit limits going to be going to be to the end of, to going

to be breached. What are the credit card company is going to do? Keep extending credit on people

that are making minimum payments. Yeah, it doesn’t make any sense to me.

Jeff Kikel: Yeah. And like I said, there’s been so many people that.

Jeff Kikel: It’s an interesting conundrum, though, because you see credit card debt going

up like crazy. But then, as of recent, we’ve seen the national savings rate going up, which

is. I don’t get it. I’m like, okay, there it’s like there’s a two tiered economy there.

There’s, people that are have stretched themselves to the limit and they’re on the breaking point.

Jeff Kikel: And then there’s people that are like, Hey, I’m hunkering down I think things

are getting, I think things are getting worse and I’m hunkering down and that’s a honestly

that’s a, it’s a I feel. That people have learned their lesson, because if you look

at all these, if you look at 2001 to 2003, you look at you have 2008 to, basically [00:11:00]

2010, our savings rates were just absolutely atrocious and they were going down at those

times.

Jeff Kikel: So it’s an interesting thing. It’s a weird conundrum this time where people

are going, okay I’m just going to hunker down. I’m going to start. Putting some more money

into savings, which could hurt the service economy because we live on a, we live on a

consumer economy. And if the consumer starts to pull back and put into savings, that can

have some effect, trickle down effect into the the stock market.

Ron Lang: Yeah, it’s interesting. All right, let’s let’s move on. Yeah, so this was the

lei from last week and you and I love this. I’ve been tracking this not as often as I

probably should have, but I’ve been tracking this at least. At least 15 years that I could

think of. And we got such a divergence now in the year over year versus the real GDP

and again, what is the lag effect here?

Ron Lang: What is the catalyst? We can look at this chart all day, but I think it’s the

next chart. The next two charts [00:12:00] here, this one kind of also shows too, Facts

don’t lie here just about, this is a conglomerate, right? A compendium of a lot of different

types of factors going into basically measuring the overall strength and health of the economy,

but when we really dig down here and it’s not that it’s because it’s at a negative,

right?

Ron Lang: Let’s dig down into each of these things. We’re not going to have time to go

through all of these. The biggest one that stands out to me. Is the ism, right? The ism

orders here. This basically is for manufacturing. And this is just showing how much manufacturing

is slowing. You and I know this going back into the end of last year, beginning of this

year, when we started to see a bunch of layoffs happen in the tech industry.

Ron Lang: And typically you see it in, big industrial names. Mainly manufacturing when

that slows, right? There’s that trickle effect to the rest of the economy. [00:13:00] So

I don’t know what your thoughts here or what other numbers stand out to you. That

Jeff Kikel: ISM is huge for, and I think it’s backed up and I haven’t watched it as much

currently, but you started to see this and Philly fed, New York fed.

Jeff Kikel: A lot of the East coast feds, you started to see manufacturing slowing really

significantly the manufacturing indexes in those kind of East coast areas not so much

down South, but those the big ones up North, I think Richmond too, was showing massive

reduction in the manufacturing indexes.

Jeff Kikel: So I think this all kind of sets up. And it says, okay, are I think there’s

some uncertainty because of a lot of the just crazy regulations that just keep flying out

of Washington specifically in the administration. It’s just okay, now we’re going to focus on

this and we’re going to focus on this and it’s all climate change and all this and they’re

[00:14:00] throwing a bunch of, a lot of these.

Jeff Kikel: Regulations down and I think it’s making the manufacturing sector and really

downstream from them their orders. All of a sudden, these guys are like, okay, guys

and gals, I don’t know what to expect. I don’t know what’s coming on. So I think it’s partially

economy. I think it’s partially the, administration just being on this tear of just going crazy

with all these different regulations that yes, we’ve got to worry about the climate,

but you know what?

Jeff Kikel: We can’t worry about every single. We can’t administer every single thing in

my house, I’m not going to sit there with a wash tub and a in a blender that’s connected

to a bicycle. I’m sorry. We have to have electricity. Yeah, we have to, I actually enjoy having

my dishwasher.

Jeff Kikel: I like to cook on a gas stove. I’m a cook. I love that. So screw you Washington.

Stay out of my house. And stop doing all this stuff. So I think it’s some it’s a combination

of both of those. [00:15:00] I would say that are having some effect here. And I think it’s

trickling down, but I think also a lot of these guys just don’t know what’s coming.

Jeff Kikel: And when they don’t know what’s coming, they tend to just back off and say,

all right, we’re going to slow up manufacturing a little bit. Which, if that continues, and

this is it’s the most significant part of this. These non financial components are negative

2. 7. and that’s consumer expectations and ISM new orders.

Jeff Kikel: That’s a big part because we’re a consumer economy and we have some manufacturing

in this country. If both of those start pulling back, a lot of this other stuff is going to

start pulling back as well.

Ron Lang: Yeah, I agree. And the other one that we’ve also talked about too is this the

10 year bonds, right?

Ron Lang: The North Star, which on Tuesday hit 4. 34. I think it was 4. 33 or 4. 4, then

it went down to 4. 2. These swings in the [00:16:00] bond market is not good, but when

you’re taking, when you’re checking out the rate spread of the 10 year versus the fed

rate, that the negative 0. 9 basis points is a huge move.

Ron Lang: Yeah, month after month. This just means that people don’t like what’s in the

future And they’re investing short term less than a year. Basically. Yeah, this is what

they’re focused in on And you and I will follow it every now and then about the anticipation

of rate of rate, decreases Rate decreases.

Ron Lang: We’re going to get one in either September or November. And based on what comes

out tomorrow, they’ve already said higher for longer. Why aren’t people listening to

what the Fed is saying? Instead of saying, Oh no. There’s going to be some catalyst.

Don’t count on a catalyst. Just listen to what they’re saying.

Ron Lang: Inflation rate has got to get down to the two, two and a half level before it’s

even a consideration. To lower rates, even a quarter of a point, which in my opinion,

I think is next summer [00:17:00] or maybe Q3 sometime next year. So I think that all

of this is ominous just for the overall market in the next six to nine months.

Ron Lang: Yeah. And,

Jeff Kikel: and the fed tends to not like to act in either direction during a presidential

election year. So we’re going into 24. They don’t like to do either direction during those

time periods because they, it’s seen as affecting the markets, which can affect the president,

the presidential outcome and all that.

Jeff Kikel: So it is very unlikely that we’re going to see much action next year out of

them. I don’t think we’re going to see a lot of interest rate raises. During the year,

but I don’t, I really don’t think we’re going to see very much if any drops in the interest

rates at that point because they’re going to let it roll out and then all right, whoever’s

in office, then that gives us cover to be able to do whatever we need to from that point

on.

Ron Lang: Yeah, and I truly believe that.

Ron Lang: We’re looking at everything and I [00:18:00] guess it’s more, this is just

more of a, a thing to our viewers here, as much as maybe you’re listening to us talk

about what we feel, and this is just pure opinion when you’re watching financial news,

whichever network it is, when you’re looking at financial.

Ron Lang: Articles or whatever source you’re looking at. That’s the issue consider the

source because when you talk about people that talk about a soft landing a no landing

or whatever You got to think about why are they saying that right? Are they not looking

at the facts now? I’ve also heard this for the last year, you know The recession potent

the potential recession is the most anticipated recession in history Okay.

Ron Lang: Yeah. Everybody looks at the facts. They understand what’s coming, but hey, there’s

that FOMO, right? Fear of missing out. The market’s going up now. It’s sideways and going

down. What are you doing to protect yourself? If you’re looking to retire in the next three

to five years, Or if you just went into [00:19:00] retirement and you were still growth heavy

in your portfolio allocation.

Ron Lang: So all these factors come into play here as far as what your consideration should

be moving forward. So when you’re listening to these pundits on TV, right there, they

don’t know your situation. They’re just talking either about their book, about the people

they represent, right? Maybe what board of a fund they’re on, right?

Ron Lang: They may have conflicting factors that you’re not aware of. So you really need

to sift through this because a lot of what they’re saying, in my opinion, it is about

as clear as mud. Yeah,

Jeff Kikel: well, and the thing I was listening to somebody on one of the financial news channels

the other day, and I’m thinking to myself, dude, you had an answer for every possible

situation today.

Jeff Kikel: Two weeks ago, I said the market was down. Okay the market’s down today. So

you’re right. The market was going to be down. You’re you had a 50 50 chance of choosing

it. At that [00:20:00] point, I heard this 1 time, I heard this from from a a fund manager

and he was talking about analysts and he’s he has any time an analyst goes out there.

Jeff Kikel: They have a 50 50 shot of being right. So they say, it’s got the stock or

the market’s going to go up, or it’s going to go down and he’s if they’re right twice

in a row, all of a sudden, they’re a market pundit. If they’re right 3 times in a row,

they’re a guru and everybody listens to them.

Jeff Kikel: Now, they can be wrong the whole rest of the time, but if they’re just right

during that time period. Yeah, I take it as a grain of salt. Take what we say is a grain

of salt, but what I would say is, we’re here to really just report on what’s going on and

if you see. The, if you’re looking at this and saying, Hey I’m uncomfortable with the

markets and to Ron’s point, Hey, I’m coming up to retirement here in a couple of years.

Jeff Kikel: This ain’t the time to go crazy and, swing for the fences. This is the time

to start now, not going the opposite direction and saying I’m going to take everything and

dump it in cash and I’m going to sit here and wait. [00:21:00] No, you want to start

building a portfolio that sets up your retirement.

Jeff Kikel: So that you know where your retirement income is going to come from for those 1st,

let’s say, 5 years. And then the rest of it is money that, you’re going to, you’re going

to win a retirement. Let’s say it’s 66. You got a pretty good chance of being around at

least another 25 years. At that point, and you should think about that, and we’re going

to go through multiple market cycles.

Jeff Kikel: In that time period,

Ron Lang: I think I might have mentioned this before, but I think it’s worth repeating.

So if I ever have another career, if I ever get reincarnated, I want to come back as 1

of 3 things. A meteorologist and economist or stock analyst. Cause I could be wrong more

than 50% of the time and keep my job almost forever.

Ron Lang: Absolutely. As long as I talk a good game.

Jeff Kikel: Yeah. If I can just talk a good game and I can be, I can be out there just

constantly babbling one

Ron Lang: home run every now and then

Jeff Kikel: I, yeah. And if I get a home run at a major market event, I basically [00:22:00]

I’m set for life. I’m right. I’ll ride that

Ron Lang: surfboard for a long time.

Ron Lang: That’s

Jeff Kikel: exactly right. I don’t even need to show up to work. I’m just going to ride

the surfboard and do a monthly newsletter that I put out saying, I predicted the, the,

that’ll be on the tombstone. Yeah. I predicted the most obvious recession of the entire world.

In 2023 2024.

Jeff Kikel: And, I’ll be set. So we have this opportunity run because we’ve said it’s coming.

At some point when there is a recession, we can say we predicted this.

Ron Lang: No, I agree. And you know what? Before It’s officially a recession by economic

standards will be the time to leg out of the short term fixed income Stability strategy

and start legging into the growth strategy because you’re through compounding and everything

else You’re only going to come out ahead on the other side of it Whether the recession

is short lived or it’s deeper and wider than we expect, it’s not going to matter, but we

can’t pick the bottoms, [00:23:00] but if you’re legging out throughout the entire recession

process, you’re only going to come out ahead looking great over the next 2 to 3 years.

Ron Lang: Yeah, so we shall see. Yeah, like I

Jeff Kikel: said, but prepare time to sit down with your advisors, look at what your

portfolio looks like. And then say, Hey, I’m gonna retire in a few years or I’m not retiring

in a few years. So what do I need to be doing? And, this, those times when the market’s down,

it’s I’m a big proponent of legging money in as you go.

Jeff Kikel: So dollar cost average in throughout your life. And whether it’s up or down, you’re

going to do well, over the long run, because you’re not you’re taking the thought process

out and the timing out and everything else. Thank

Ron Lang: Yep. Next week should be interesting once we hear about the Jackson Hall and see

how volatile the market will be on the biggest vacation in the week coming coming up.

Jeff Kikel: Absolutely. Those of us down here, we’re already past all that and we’re on to

the fall at this point and the fact that it’s been 100 degrees [00:24:00] every day, we

finally broke the back of that this week. I don’t have to hear the news constantly talk

about the 44 days of 100 plus degree heat at this point.

Jeff Kikel: So we

Ron Lang: had over 150 degrees here, 150 degrees, 150 days, better than 100 degrees here. Throughout

through this summer. Although I got to tell you. It didn’t seem that bad except for a

few big humid days. But other than that, it wasn’t horrible summer. Last summer was bad

because the humidity was up.

Ron Lang: But welcome to the Southwest,

Jeff Kikel: right? Yeah. Did Hurricane Hillary and the pantsuit come whipping through Arizona

at all?

Ron Lang: We got some rain, but I got to tell you, it cooled off. It felt like fall weather

here for three days. It was wonderful.

Jeff Kikel: Wonderful. Yeah. And we sent you another hurricane, the other side of it, man.

Jeff Kikel: This is. Thank you. You’re welcome.

Ron Lang: Thank you. As long as we, as long as we get a little bit of reprieve, it’s all

Jeff Kikel: good. Yeah. I live in the one place in South and Central Texas that did

not get a drop. Oh, we got 45 drops of rain [00:25:00] that immediately just evaporated

off of our back deck. That was our hurricane experience.

Ron Lang: Now you up your rainfall numbers for the year.

Jeff Kikel: Yeah. Yeah. Or for the month, we actually had some measurable rain, which

was not even measurable. But folks, thank you. We do this for you. And it’s it’s our

opportunity every week come together, share what we’ve seen out there. Certainly 1 go

back to the beginning of this.

Jeff Kikel: If you are deathly ill. on your couch right now. Hit that little up arrow

to let us know you’re out there. Hit that little up thumb and make sure you took the

day off

Ron Lang: and around the beach.

Jeff Kikel: Yeah. If you’re on the beach when you watch this after you come back, just give

us an up thumb to because we want to see that as well.

Jeff Kikel: We will see you guys back here next week. Thanks a lot and see you next time.