Market Craziness, War in Israel, and More Speaker Circus | COT 28
Jeff Kikel: Hey, everybody. It’s Jeff and Ron here with the sense of things for another
weekly update on what’s going on in the world, what’s going on in the markets and what’s
going on in the economy. This week, lots of economic news. We have leading economic indicators.
We have a couple of the manufacturing indexes again, a lot of the same stuff, there’s some
interesting things going on in the world.
Jeff Kikel: So Ron, what’s going on, buddy? Morning, Jeffy. Oh, good. Never a dull moment.
Even after the events a week and a half ago news doesn’t stop. No, it doesn’t. We’re dealing
with not only the conflict in the Middle East and that, getting hotter and hotter, but we’re
still trying to have a, still trying to get a speaker of the house and everything else
to stabilize things in Washington.
Jeff Kikel: So [00:01:00] just, once again, craziness, but we will find our way through
all this. I got to tell you, things are only going to get worse before they get better
out there and also the Russian Ukraine and I got to tell you, I am shocked. I did predict
oil would get to 100 by the end of this month.
Jeff Kikel: We’ll see. Yeah, but I just don’t understand how we didn’t take a bigger hit
in the market. Yeah, the last day, the last 10 days. I look, I get Hey, focus on where
we are, but there’s going to be contagion here. This thing is going to spread. And I
just don’t understand how. People are just not ignore basically ignoring what’s going
on outside of our borders.
Jeff Kikel: Yeah. But I don’t think they can, I don’t think they can ignore the bond market.
And the bond market is signaling ugly, at this point, rates going up like crazy. Once
again, they’re not the most exciting people in the room, but bond traders tend to be the
smartest guys in the room.
Jeff Kikel: And the bond market always [00:02:00] leads the stock market. That’s been forever.
Yeah. And I think they’re signaling, Hey, this is going to suck and it’s going to get
way worse at this point. And, I think rates going up. It just keeps continuing to beat
on on the, what used to be the safety part of most people’s portfolios.
Jeff Kikel: If you’re holding it to maturity, it doesn’t matter. Right and one of the frustrating
things that I have found listening to financial tv Which is why i’ve always said that the
best way to watch it is on mute Yeah, is that they’re focused in on the risk with treasuries?
The only risk with treasuries is if you get in now And you may sell before maturity date
and it goes down.
Jeff Kikel: If you hold on a maturity date, it’s risk free Yeah, so what’s the risk? The
average investor is not trading a treasury unless they needed the money So you’re not
going to, so you shouldn’t, go that far out in duration. So I don’t understand why they
keep pushing treasury risk when, if [00:03:00] you’re holding on it to maturity, there is
Jeff Kikel: Yeah. And same thing, junk bonds and everything else. There’s a little bit
of. Default risk and junk bonds, but that’s been significantly less here lately. Surprisingly.
It’s been significantly less than that aspect. I think we can kick off a little bit. Let
me let me go over a few of the economic things that I saw this week.
Jeff Kikel: As I was looking through econ a day let me just, oops, hang on, make that
go away. Stop sharing. Oh, no, let’s share the correct thing. This time you cut that
out. All right. Some of the things I just saw through economy this week. We’re looking
at Empire State Manufacturing Index for I think the 9th or 10th month has been in the
negative, and it’s just not getting better.
Jeff Kikel: It’s not horribly, down every month, but it’s just this continuing thing.
Philly Fed, same thing. Philly Fed did accelerate a little bit this [00:04:00] month. I think
it was down like 0. 7 or no, it was actually down 0. 9, 0. 13, 0. 5 last time or 13. 5.
Down 9 again, so it’s just continuing to be this manufacturing index going down.
Jeff Kikel: So they’re signaling something from that aspect. Retail sales, manufacturing
less goods to be sold. Yeah. I just think they feel like, okay, we’re just, we’re anticipating
that somewhere out here, we’re going to have, a contraction in the economy and we just don’t
want to continue to manufacture and build inventories.
Jeff Kikel: Someplace else from that perspective retail sales were actually up. They were actually
up from the prior, which was 0. 6. They’re up 0. 7 this time above the consensus range,
above what the consensus was, which was 0. 3. So that’s still, we keep saying it, but
the consumer is still there and the consumer is still buying things at [00:05:00] this
Jeff Kikel: A lot of that could be related to back to school sales, too. It could be.
Yeah, because this was September. So that really could be at that point. But still,
strong we heard a lot about what people are economizing and everything else, but they’re
spending on their credit cards and carrying over the balances.
Jeff Kikel: Yes, that 22 percent or whatever it is. So just insane housing starts and permits.
I know you’re going to talk a little bit about mortgages housing starts and permits refaining
about where they’ve been a little bit better this month than the previous month. Just continuing
that part of the economy, which is good.
Jeff Kikel: Because that means we’re housing starts that’s new houses and everything else.
And of course, jobless claims were down and we’ll talk about a little bit about that in
the in the leading economic indicators. That was the only bright spot. I would say of the
leading economic indicators from what I could see.
Jeff Kikel: [00:06:00] Yeah, look people are still hiring. People still got jobs. Yeah,
they’re still spending, but as we saw with credit card balances breaching a trillion
dollars a couple of months ago that number is not going down. It’s still going up. So
yeah, and I’m spending, but they’re spending money that they don’t have.
Jeff Kikel: Yeah. I’m interested to see with this jobless claims as the UAW strike continues
to go and go, how long the strike fund is going to hold out and when, those folks are
going to start filing for unemployment. At some point in here. Yeah. I thought they could.
I thought they could even though.
Jeff Kikel: No, they can’t because they didn’t know. Yeah, the strike funds basically paying
them a wage. It’s not full wage. These guys aren’t like partying on the beach somewhere
during this time period because they’re making less than they normally would make. But I
mean at some point the strike fund is going to start wearing out and then from there It’s
you know, now you’re dealing with okay more and more people dumping on to the Yeah, I
got to tell you i’m going to plead ignorance.
Jeff Kikel: I haven’t really [00:07:00] kept up with the uaw situation in a few weeks Yeah,
have they backed off the 40 percent raise or the 30 30 percent raise in a four day weekend
no, the, and I believe people should be paid for their worth. But, I think the fact that
from what I’m seeing from UAW is they’re just absolutely not going to get, budge an inch.
Jeff Kikel: They just refuse to budge an inch where the car companies are coming with. How
about this offer? No. How about this offer? No. And there’s no three different car companies.
Yeah. Yeah. And this it’s to the point where it’s okay guys, you’re going to have to, you’re
going to have to budge a little bit cause you’re not negotiating in good faith.
Jeff Kikel: You’re just you’re just like, okay, I’m digging my heels in. It reminds
me of Washington now, I’m digging my heels in and I’m not going to negotiate at all because
They seem to think that UPS got this great deal, so we, everybody should get this great
Jeff Kikel: UPS’s deal, although it appears like it was [00:08:00] so great, it wasn’t.
I’ve got a UPS guy that’s a good friend that comes into the office all the time. And he
was like. This whole talk about all these, drivers making like 150 grand a year, he’s
I want to know where that is because actually, I do have a client that works for ups pretty
high up what he said is 170, 000 is the total comp package with benefits and overtime and
things like that on the top end.
Jeff Kikel: That’s where it is. Okay. Yeah, but still I’m like, all right, theoretically,
yes, but most of these guys are not making a four. Yeah, they’re not making a fortune.
They’re, they’re doing their jobs and yeah, they get paid decently, but yeah, some of
the stuff with, I just, I want people to get paid what they’re worth, but there’s a point
Jeff Kikel: You start to hurt the companies and there’s this whole belief. Oh these, it’s
the guys that run the company. They’re making all this money. And I’m like, yeah, but the
people who actually own the company are the [00:09:00] shareholders and those are like
teachers and pension plans and all that.
Jeff Kikel: Don’t forget, and I know I mentioned this before, to the worker, there’s no risk
to them. With the company, guess what company goes on or they go get another job. Yeah.
But the more that they push up wages, which is the largest input cost that means it’s
all, that means the cost has got to get passed on to us.
Jeff Kikel: And then that means that the earnings will get shrunk, which means the stock price
will go down. So who does that behoove it in the long run? Yeah, that’s why I always
believe With the unions, right? Not the unions, but the employees themselves. They should
be getting stuck Yep, so this way they understand that hey The better that you do your job and
everything else the stock will go up and that’s how you could also build wealth But they don’t
want that risk either. Nope. No, not at all You know, they would rather the pension plans
and all that take the risk [00:10:00] and it’s okay It’s yeah, the reality is yeah,
there is no risk to the employer to the employee really whatever they get out of this Is going
to be better than what it is.
Jeff Kikel: And, I think the other side of it, the argument they’re going to be building
more electric cars and that, it won’t have as many, employees as all this. And I’m like
that could be a reality, but the reality is. Yes, they’re starting to build a lot of electric
cars that people don’t want.
Jeff Kikel: The real interesting union thing, and then we can move on to lei. Yeah It’s
gonna see after this is resolved with uaw, who’s next right? i’m not talking about the
culinary Strike in Vegas or whatever. It’s amazon. Oh, yeah There we go, because if they
end up unionizing truly across the board, it’s going to be it’s going to be tough sledding
for the consumer.
Jeff Kikel: That’s all I can say Because amazon and walmart right now are bringing it down
the cost of everything as far as i’m [00:11:00] concerned And obviously convenience is a part
of it. Yeah, but if the unions get their claws into that there, there goes the moat the edge
for these companies.
Jeff Kikel: Yeah, exactly. And, that’s something that you cannot, you really can’t control
the wages at that point. And, that the more the wages go up, the more of my prime charges
are going to go up and, the costs of everything related to what I do. And, I’ll be right there
to say, there’s so many times I go out and I’m looking at the local.
Jeff Kikel: I’m looking at the local place where I shop and I’m like, okay, there’s nothing
that I want here. Boom. Amazon’s got it, and it’ll be there probably before I get there
just out of curiosity. Do you know how much prime is now? I know when I started at 11
years ago, it was 59 a year. Isn’t it like 50 or 1 60 now or more?
Jeff Kikel: Is it more? I don’t know. No, I think it’s 159 or something like that. What?
Trust me, I put a hurt on it every year. So I get my money’s worth too,[00:12:00] at the
end of the day with unions or whatever, the prime is going to be over 200 bucks. Yeah,
probably. Cause that’s the only way they could do it.
Jeff Kikel: If they’re still trying to get people to the website. That’s exactly right.
Yeah. Cause they can’t get it really on the transaction cost side of things. So it’s just
going to come out of, us. And, when’s the next one? Then it’s Costco, then it’s blah,
blah, blah, all these different, yeah, things at this point.
Jeff Kikel: I hear you. All right, let’s move on to le I’ll let you kick it off. I know
you had a chance to review it When it came out this morning Yeah, so I think you know
the big thing that I saw from this and certainly your input the big thing I saw is pretty much
There was only one What I would consider a good part of this one, which was the unemployment
rate that’s the only real positive.
Jeff Kikel: It’s the only thing everything else was either neutral or negative At this
point and we’re continuing to go down on the side of it. The only thing that’s holding
us away from state, [00:13:00] completely signaling a recession at this point is the
GDP and, who knows what those numbers are going to be.
Jeff Kikel: I, once again, I’ve said this before. I still think we’re probably in a,
the beginnings of a negative GDP period. It’s just, it hasn’t Been reported yet. It’s funny
you say that because it was either last podcast or two podcasts ago. We saw the Atlanta Fed.
Had an absurd GDP growth number. It just increased it the last week if you’re wrong once just
double down on it, I guess but no, but you’re right the lei did tick down it flattened out
a little bit which you know could goes down in a straight line Which it looks like it
did but it did tick down again and on the right side here You know, I’m just going to
ride your coattails of what you were talking about with manufacturing, the ISM orders,
that is the aggregate of all the manufacturing in the country.
Jeff Kikel: And it was down again. Yeah. And [00:14:00] that one’s accelerated. That’s,
if you looked at LEI from six months ago, that was like a negative one or something
like that, or negative like 0. 95. So it’s just continuing to accelerate, and I think
that’s. That tells me that all that’s the 1st straw.
Jeff Kikel: The 2nd straw is going to be on the unemployment side of, people. Okay. These
manufacturers going. Okay. We’re not making as much stuff. So we’re going to. We’re going
to pull down and it’s interesting to see, and I would assume in that number is the 3
major car. Companies, because they should be manufacturer.
Jeff Kikel: Is that going to accelerate which then indicates? Okay. Those. The the unemployment
figures really start to increase dramatically, you know dramatically I mean you and I are
picking out the same things as typical, but I will tell you the one thing that I’ve been
talking about it for months I was talking to another advisor friend of mine that if
the 10 year Breaches and stays above five [00:15:00] percent a lot of people look at
That’s the crack.
Jeff Kikel: You’re falling through the ice. Yep. Now we hit 4, 9, 6 this morning. I saw
it very early this morning. I don’t know where it is right now, but I know it was hovering
above four, nine. So we may go above five, pull back, but if we stay above five. I heard
a couple people talking about five. Five or six.
Jeff Kikel: Yeah. Some some key people that I do listen to. I think five is a psychological
number too. It’s a big round number too. Four nine. Yeah, four. Nine. Seven doesn’t sound
as big as five. Does. And you start looking at, okay, I’ve got a riskless return of five.
Okay. What, I’ve got a client that we just moved some money into a money market account
for him that he was sitting in a chase account, making like point nothing on a million dollars.
Jeff Kikel: And just to make the first step of getting some stuff moving, we moved over
to a money market at Charles Schwab making 5. 25%. It’s that’s literally, we did the
math or he, he finally started doing [00:16:00] the math in his head and he is crap, that’s
like a freaking trip per year.
Jeff Kikel: It’s like a lot of travel per year and I don’t have to do anything for it.
That’s, and this is why they say the small and regional, the small and medium sized regional
banks are in trouble. Yeah. Because people are pulling their cash to go to the higher
yield money markets or the treasuries.
Jeff Kikel: So they don’t have the deposits that they need or the cash in there that they
need to lend out, which just goes into the whole cycle of the credit tightening and not
as many loans are free flowing out there. And I think, when I look at this thing, the
chart too, the other, green shoot or the other positive was the S and P 500, and you’re to
your point at the very beginning of this.
Jeff Kikel: We were talking about today. It’s just shocking to me that all the craziness
that’s going on in the world, in Washington and everything else. And the S and P just
keeps pounding through, like I said, the only thing [00:17:00] that’s really had an effect
on it has been the last couple of days, the bond market going, Whoa, Hey, hold on this,
something’s bad going on here.
Jeff Kikel: And that all of a sudden puts the brakes on the S and P. There was some
underpinnings with the bond market at the end of last week, the beginning of this week,
they tried to do a 30 year and a 20 year auction and they fell flat, meaning that there wasn’t
the demand that they thought there would be.
Jeff Kikel: And that’s what sent the market down. Yeah, so we’ll have to see. They’re
still trying to raise more money. To help pay for these geopolitical events and everything
else. At some point, I know Janet Yellen came out and said, they got plenty of money, they
got plenty of money to support Israel and Ukraine and everything that’s going on in
the U S that’s fine.
Jeff Kikel: If you’re keep printing money, but if nobody’s buying the treasuries. That’s
not good. All right. You actually, I thought it was a little disturbing is when you see
moves like this is what you got to just pause for the cost, but the [00:18:00] mortgage,
the 30 year fixed rate was seven, five, seven, one week ago, and it breached 8 percent yesterday.
Jeff Kikel: How many people are buying houses? I understand you could refinance in three
to five years. You got to still shell out. Depending on what kind of a house you’re buying
another two to 400 a month until the the mortgage rate gets below five or 4 percent again. So
you’re shelling out all this additional money just for interest that isn’t even going towards
Jeff Kikel: And the thing is, housing prices have still remained stable, going into that.
That’s the interest. There’s no inventory. Yeah. People want to sell their houses, but
there’s nowhere for them to go at 8%. Yeah, it’s intriguing, but yeah, that’s, it’s scary.
And it’s been a long time since it’s been up there in that range was what?
Jeff Kikel: Two in 2001, which I mean, to me, it’s shocking. I didn’t even remember
it was up around [00:19:00] eight in 2001. Quite frankly, during the craze of the the
housing market, I’ll be blunt until I looked at, excuse me, a few charts a few weeks ago.
I thought it was at seven or 8 percent back in 05, six and seven, when the more of the
mortgage people were just going nuts with housing.
Jeff Kikel: I didn’t realize that it had, it has been 22 years. Yeah, that’s scary.
All right, so then the next thing is shifting gears off of some of the wonderful economic
news that we always decide to Chew on every week is just talking about just portfolio
management for the long term Yeah, and I thought this was interesting because i’ve seen these
charts over the years But even doesn’t matter whether you’re talking to a 20 something or
a 50 something They’ve got to know the numbers meaning that if you’re invested in high quality
positions Even if it [00:20:00] goes down you should still be adding.
Jeff Kikel: All right, it’s on sale Compound your returns on the upside, but people that
want to get in and out of the market I think this is just very telling on its own. Yeah.
So if you invested 10, 000 over the last 42 years, but you are going in and out of the
market and you may have missed. Five or 10 or 30 of the, or the 50 best days since then,
Jeff Kikel: Look how much your returns would have decreased over the last 42 years. Yeah.
You put in 10, 000 and just said, okay, I’ll reinvest the dividends and we’ll just keep
calm, leave it alone. I’m not going to think about it, and that’s what I tell clients.
If you’re gonna, if you’re going to invest yourself.
Jeff Kikel: It’s like invest in an index and then don’t monkey with, don’t even look at
it. Just let it go, and there will be times. Yes. There’s going to be 2008 when that goes
down 40 percent or 30 percent or whatever. [00:21:00] There’s two decisions. Every time
you trade out of that, there’s the decision on when to get out.
Jeff Kikel: And then there’s the decision on when to get back in. And what I will say
is a lot of people timed. Okay. I would say in 2008. A lot of people time the get out
part. Okay. They saw it going down and they got out, but I remember clients that we were
talking to that were three, four or five years down the road and we’re still sitting in cash
or still sitting in bonds or something at that point.
Jeff Kikel: Most of them just went to cash and then sat there and missed out on the recovery
time. Look at COVID. Everybody was scared. Cropless. Right when we hit a low of March,
23rd of 2020, right? We went down 30 percent in a straight line in six weeks. People thought
we were going down another 20 to 30 percent.
Jeff Kikel: Yeah, how many look I had a client that got out two days Before the low he couldn’t
take it anymore And he took him six to eight months before he wanted to get back in. [00:22:00]
Yeah He suffered he absolutely suffered because of what he lost and when he got back in he
had to pay a higher cost basis So but even so I get it right, it’s emotional.
Jeff Kikel: It’s pain. I gotta get out but For the long term, it works out. So maybe
there are some things you could time, but to do a wholesale change of in and out makes
no sense at all. Absolutely. Totally agree. Yep. So my last chart here is about recessions
going forward with, not trading your portfolio, even with recessions. If you look at the last
11 recessions in the last 73 years, even if you kept adding on the way down, and certainly
we all know the, the escalator up and the elevator down and the escalator up and the
elevator down. We’ve all seen this happen multiple times, but the idea is that just
keep adding to the quality positions over time, including if you’re in a good index
Jeff Kikel: That’s mirroring the market [00:23:00] moves are better. You’re compounding your
returns. If you keep investing right through the recession versus I’m going to sit on the
sideline. Yeah. And of course, we’re not talking about a 65 or 70 year old person, cause they’re
in a different mode, but we’re talking about, probably people 50, 55 and under that still
have another 10 to 15 or 20 years to go.
Jeff Kikel: Sure. I think the reality too is, yeah, they’ve got that time to go, but
they’ve also got. Let’s say they’re 65, you probably have got another good 20 years at
that point on top of that. So you can’t get too conservative too fast. Yes, you need to
start positioning your portfolio for, income, but you still need to have growth in your
portfolio because inflation’s just going to eat you alive over time.
Jeff Kikel: And then if you go through a couple of years, like we’ve been with the bond market,
where that’s eating into your. Your principal or whatever, cause most people don’t invest
in individual bonds, they invest in bond funds or whatever. And they’re getting walloped
right now because there is no hold until [00:24:00] maturity on that stuff.
Jeff Kikel: No. And you got to look at, people have a very short term memory when it comes
to investing. So if you look at the last 23 years. We’ve gone through three recessions,
right? We went through a deep one. It felt deeper. I know it felt deeper for me in 2001
and two, obviously the financial crisis and the COVID blip for about six months.
Jeff Kikel: So people have been spoiled and they know what happens, but they see. What
occurred people are spoiled because look what happened between 1970 And 1981 there was four
recessions Right people thought you know, we were just didn’t feel good about ourselves
We were never going to expand again things like that And then we deregulated with reagan
and everything else and then you see what happens But I think people are just quite
spoiled with what they’ve seen That they’re just not riding out the binge and purging
of the credit markets during these cycles Yeah.
Jeff Kikel: And I think, [00:25:00] you look at you look, even this chart you’ve got up,
you look at the amplitude first off of the markets during these time periods and the
extended periods of time, much longer than it used to be. There used to be these much
more regular cycles. And I think part of that is, I think part of it is feds management
Jeff Kikel: Kind of them monkeying around with the system a little bit, and it just
becomes The bad times get worse, and the good times are good, but the bad times get worse
because there’s a higher amplitude in those cases. Yeah, no I just think these charts
are just excellent reminders to everybody about long term investing.
Jeff Kikel: Yep. Trying to disconnect the emotional cable, between yourself and your
money, which is very difficult for anybody, including us. But I think people just need
to look at that. And you can have a balanced portfolio and still do well. You don’t need
to be high growth all the time. Not even balanced portfolios will still mirror the market to
some [00:26:00] extent.
Jeff Kikel: Yeah, absolutely. And there is some, adjustment to portfolios that I do with
clients. We have a trading strategy that we use that kind of looks at momentum indicators
and things along those lines. And, the interesting thing is it’s been that, that indicator has
been pretty conservative this month, even though the market has really taken off.
Jeff Kikel: But it’s certainly making us look like heroes as the markets pull back here
this week. Yeah. I think we, we need to talk about portfolio management every now and then
looking at the big picture, not just what’s right in front of us. Yeah, and like I said,
once again, if you’re doing this on your own, you shouldn’t be.
Jeff Kikel: If you don’t, if you’re not going to put in the time 1st off and decide on a
strategy that is. Has pretty consistent, if you can track a strategy and say, Hey, it
has consistent wins. You don’t have to be a 700 hitter, but you need to be positive
more than your negative in those cases.
Jeff Kikel: And if you’re not, if you’ve shown that you’re not, and most people don’t really
track what [00:27:00] they do, they just respond on emotion and they don’t really look at the
numbers. That’s. Going to come back to bite you in the end. And you’re going to end up
in that, missing a few days here and there can be a dramatic difference.
Jeff Kikel: Just missing 30 days over 30 years costs you, 30 days in 30 years, that’s one
day per year that you missed during that time period and cost you about 500, 000 doing that.
Yeah. No, it makes sense. All guys, as always, we do these every week for you. Make sure
that you are giving us a thumbs up.
Jeff Kikel: Love to hear your comments on what’s going on. Please share that with us.
We are on YouTube and within the next month, we’re also going to be onto the podcast channels.
Make sure that you You keep an eye out for that. It’ll be a place that you can also just
hear us. You won’t be able to see anything, but you’ll be able to at least hear us on
Jeff Kikel: So thanks a lot. And we’ll see you guys back here the very next time.