PREPARE NOW for What Comes Next with the U.S. Economy: @adam.taggart

many of you know Adam tager the host of thoughtful money this happens to be one of my favorite interviews it's a long one so we spoke for almost two hours I would encourage you though to not skip around I would encourage you to listen to the whole interview even if you have to break it up hit save for later and pick it up at a later time because we talk about a lot of issues and one thing I want to point out here is Adam says that this lag effect something that as a result of the higher for longer as the FED talks about with interest rates keeping them higher for longer the stock market and every other asset Market really was planning on or holding on to this year being about seven rate cuts that were sort of promised or alluded to in 2023 but now we know that that might happen so as Adam is describing some of these implications of our you know high for longer turning into hire for much longer and also the deficit spending that the federal government is doing right now almost signifies that they're just propping things up until we get to the election for instance but also a lot of people want to blame it on monetary policy but it's a combination of them both I hope you enjoy this interview as much as I did my guest Adam [Music] tager Adam tager my friend great to see you again I'm excited to dive in today we have so much to talk about uh it's a real pleasure Todd thanks so much for having me back on you know one of the things I like about our time together is you spend so much time doing what I'm doing with you right now and that's interviewing people and I know that I had the pleasure probably of having one of your only interviews where you can find on YouTube of somebody interviewing you and getting your opinions on uh the economy and the financial markets and it went over so well uh people absolutely love you they love what you do and I must say and I'm not just trying to give you a big head right now but I must say that you are doing amazing on your thoughtful Money Channel you growing so fast I mean seriously well uh thank you mutual appreciation society here and right back at you Todd your channel is doing phenomenal last time I was on I think I talked about my mission of you know trying to bring to people who are very frustrated by the lack of good quality content they feel like they're getting in the mainstream Financial media and what I'm trying to do is create financially nutritious content is the way I say it yeah I don't get much of a chance to sit on this side of the camera and I had so much fun with you the last time we did this I'm so glad you let me come back on 100% well you know what people don't get from headlines and mainstream media is honesty I mean you know I I mean it sounds really bad to say that because I'm sure that they talk about a lot of truths but the critical issues that we have with what's going on today in the US they don't cover obviously because if they did people wouldn't just go about their daily business thinking the world is great U you know I was talking with a um an economist just recently and I was kind of curious I said you know most of the people that are running our country they are baby boomers or the silent generation I mean they're there's really they're up there yeah right and we have a gerontocracy yeah yeah so when you look at it and you say okay well why is it that we aren't changing things up and actually doing things that make sense and uh what he had said was well you have to think of since like the 1970s we could screw up so badly and just print our way into you know uh out of it print our way out of it and not worry about the implications till now we can just continue to Kick the Can down the road uh but what I mean Adam I want to start out what I love about what you do is you interview great guests and and I know we want to talk about uh one specific interview here um with an ex-fed but I want to get your opinion I mean you spent 30 years uh in Corporate America and you you were on Wall Street you were at Yahoo you had a big role at Yahoo you walked away from all of that and um but you have a a pretty good knowledge of what's going on from the stock market to the housing market and um but I just want to get your opinion I mean are we really unraveling I mean so many people they want to say that you're Doomer if you talk about the things these critical issues nobody wants to face reality and I think that's part of our culture right now is that people want to just sweep things under the rug and ignore what's really going on but I mean are we falling apart uh simple question uh comp complicated answer um so the the trajectory is not good let me just be super clear on that um now people like things to be really simple um and uh I want to be really clear um the world's not ending tomorrow um and it's a multifect the global economy is a multifactorial system so uh the odds of it just you know breaking overnight and us going into some sort of you know Stone Age depression probably not super high but they're not like zero either Todd so you know we have to be we have to be cautious here um you know personally I think there are lots of reasons to be skeptical of the dominant narrative right now which is that everything's great right we got strong GDP we got low unemployment markets are still near all-time highs we're GNA have a no Landing you know you you listen to Jerome pal speak you listen to President Biden speak you know they're they're generally selling sunshine and Roses right um I I don't think that that that level of optimism um is is warranted and we can go into all sorts of reasons why but I do want to balance this out with the people like you said who who uh will listen to the you know what I would say are the the the critically thinking discussions that we have on our channels and they simply say you guys are just trying to pour cold water on you know what should be a good time for us and you guys are just Perma Bears no that's not it there are a lot of really valid reasons uh to be concerned and it doesn't mean you know build a bunker and go hide in it um but it does mean you know it's a time for Prudence it's a time that if you're going to play offense particularly um in the asset markets whether that's real estate whether that's stocks bonds whatever um that you want to you want to be prudent about it and you want to have um you know some hedges in place or at least a strategy for if the sledding gets rougher from here that you're not putting yourself uh at uh at too great a danger of of being too vulnerable um to a reversal of of the current party that we've had going on in the asset markets um so we we can dig into all that if I can just make one note on something you said earlier which is I think people come to this channel yours uh and and mine as well um for like I said more more financially nutritious content and and I think some of the reasons why they they're not getting it in the mainstream media I mean one is the mainstream the the the the traditional media has kind of become sclerotic I think it's behind the curve in general in terms of kind of what people are looking for and how people like to get information but there are a lot of things that that um that are just preventing the mainstream channels from really telling people the truth or what you and I would consider to be you know more more truthful information um one of which you know from the top level like you're never going to hear Jerome pal say hey folks I think we're going into recession because would become a self-fulfilling prophecy right everybody would all of a sudden curtail their spending um in economic activity would would immediately contract and we'd be in that recession you know tomorrow right so to a certain extent they're they're not going to tell us the unvarnished truth because they have policy objectives so one you just got to get for good or bad you just have to understand that that that's a constraint that they have secondly a lot of these other media channels and let's let's take sort of like the cnbc's of the world um you know they have they have advertisers these are ad supported Industries and the the advertisers that you know pay their bills are the black rocks of the world who want you to be buying ETFs so lo and behold no matter what happens in the world on any given day magically that turns into a reason why it's a good day to buy stocks right thirdly their formats I think just they're just insufficient for delivering the Nuance that an informed investor is interested in getting and so you know if you're on a CNBC I've appeared a couple of times on on some of these business shows and you get like two minutes if you're lucky to tell your story so all they want are clippy sound bites right where you can't get into any real detail um and and honestly what they're looking for more than substance is entertainment you know they're just trying to get either a provocative headline or a catchy little sound bite that's going to entice the person to come back and watch again after the next commercial break um and that's like getting sugar cereal for every meal right it it tastes good while it's going down but it's not you it's not healthy right it's not not giving you what you need so I I really commend you for for joining me in this endeavor to kind of break the mold in media where they're always pushing you to create a short or a little you know 30 second clip and instead you've got the courage to do a 45 minute or hour plus you know uh detailed discussion that really dives into the data and the Nuance of the story so that the audience leaves with a good enough understanding to be able to take action based on it which is at the end of the day you know all that matters information by itself doesn't have any value if you're not putting it to constructive action so again I want to congratulate you on what you do yeah well thank you uh Adam I mean it's it's Preparing People I mean and I think that's what most people just watch headline news and it's not I mean you know you would say if if you're more left you'll watch CNN if you're more right you'll watch Fox I mean both of them really I mean just like you said they're they're they have agendas they have these narratives they're not covering topics that prepare people and we really I mean the United States was founded on transparency I mean you know and now I I think for the first time in my lifetime I can say um of course I didn't live prior to my lifetime but I think the general feeling is that we can't trust the information that we're getting and that's the scariest part I mean if if you get to a point where you don't trust what you're being told and what you just said I get it I mean pal can't come out and say the sky is falling because we we'll instantly put people in panic mode and it would be like you said self-fulfilling prophecy just like the bankers that I speak with I mean if if they came out and said wow our bank is in really bad shape I mean you know it wouldn't take but a couple of hours before they would be in the worst shape that they've ever been in and out of business uh like we've seen in the the last year or so the bank could literally be in Flames behind them and they're going to tell you everything's okay everything is great right and and but you know what so is Corporate America the same way I had a conversation with a friend of mine and we were talking about it we said look you there has to be a certain amount of distrust of any anyone that has a very high position right you have to have a level of skepticism because what CEO of any Corporation is going to stand up and tell all of their people that you know they may not be around in three months from now we might replace you you're not going to say that you're going to tell them the company's great everything's going we're working through it we're and then all of a sudden you get a pink slip or like the old days but you get let go and so you're like wait a minute he just told me everything was great and now I'm being fired or I'm being laid off so I get that um there are a lot of implications I guess the biggest thing for me is that I mean we have big issues we have pensions that are probably getting cut we have social security that you know everyone has said is going to go you know it won't go away but I think you and I believe that it is on a path to destruction yes yeah so where do you think I mean what are some of the implications for this higher for longer uh we had spoken before and you said the market built in rate cuts and we haven't seen them yet what I mean what do you expect to happen over the remainder of 24 okay um so you you put your finger on it which is uh higher for longer what I refer to is the lag effect right um you know interestingly everybody thought coming into 2023 right that we were going to have a recession right it was the most predicted recession uh and it never happened right and uh and interestingly the economy ended up growing quite nicely uh through that year and into q1 of this P this current year uh and the markets did great right um and that's all in the context of the most aggressive um interest rate hike regime the Federal Reserve and other world central banks have ever gone on they' never raised interest rates so so high so quickly right and so everybody was was sort of holding their breath waiting for the recession to arrive and then of course it didn't now lots of reasons why it didn't but I think a really big one has been um liquidity and liquidity is something that's that's it's it's it's a fuzzy term because there's all sorts of different ways to measure it and everybody kind of has their own different ways of doing so but most of the people that I interview that track liquidity closely Michael how um from Capital Wars uh being a prime example of that um their numbers show that net liquidity bottomed in October of 2022 and it's it's basically been rising since and so this is things like um well for sure it's the out ofc control fiscal uh spending that's been going on right right now we're running one of the highest deficits we have in the history of America as measured as a percent of GDP in fact the only other periods in time where we've had um the deficit this big a percentage of GDP were during the covid crisis during the Great financial crisis and during World War II right so it's only other times right so three incredibly you know emergency periods in our country's history we had to have rates that high now we're technically not in eer you know technically everything's great right I I listed those things earlier yet we're still at these emergency levels of deficit spending you know on top of that you had the draining of the um of the TGA which was stimul the treasury general account which was stimulative and that was uh during the whole debt sealing uh period and then uh you've had the draining of the reverse repo program so these are all things also the the the bftp uh or bftp uh the bank term funding program that was passed a year ago to rescue the banking system that's been providing liquidity in the system as well right so that's basically been a rising tide that's overpowered a lot of the other challenges to the economy that that that you and I will probably talk about in just a moment um and so as a result people have you somewhat understandably begun to say oh well I guess maybe the lag effect's not going to arrive this time right maybe it doesn't matter and that's how we went from The Narrative going from hard Landing to soft Landing to no Landing right now right so uh anyways the lag effect is basically caused by um the contractive effect of the FED policy right of of of increasing the cost of capital that's what the FED has done by by Rising interest rates uh and it it is start it is it it is draining some liquidity from the system at the same time that's just been getting overpowered by everything else I mentioned but the FED is doing quantitative tightening right now right the the the market you know was taken all that into account but but as you recall during 2023 it kept expecting the FED to Pivot and pal had to keep coming out and saying hey everybody nope I'm going higher for longer and the market had to keep walking back its Mark its expectations for for a Fed pivot then in December of last year pal surprised everybody at the beginning of December he said you know what um we're not even talking about right cuts everybody so quit asking me for it two weeks later he said oh yeah no we're talking about it in fact we're probably going to do several next year right told the market exactly wanted what it wanted to hear and then the animal spirits just ran wild right and then the markets just went bananas they went up a the S&P went up a thousand points basically went up about 25% from uh November early November of last year until the end of uh end of q1 this year right so um so now all of a sudden you know markets back at all-time highs um housing prices are still at all-time highs too and we'll talk about that in just a second but anyways where I'm going with all this is okay so now inflation has really started to thwart the fed's optimism here right it's it's proving a lot more sticky and over the past you know month month and a half you've had more and more fed speakers come out and say well you know what like well we're still thinking about doing rate Cuts this year but we're really getting concern you know we're really watching inflation here and if we if we have to keep higher we will well that's morphing pretty much now into a hey everybody you got to slow your roll here on the expectations so um Pals came out and said the recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve the confidence we want um and if higher inflation does persist we can maintain our current level of restriction for as long as needed uh bosk who runs the Atlanta fed he came out and said yeah guys we might only actually get one rate cut this year probably at the end of the year um and Meer um recently came out and said that uh she's basically walked back the guidance that she's given the market and is basically to say that look if if if we cut it all it's going to be at the end of the year now on the day we're speaking yesterday Bank of America just came out with a report saying hey everybody we're probably now not going to get a rate cut until 2025 right and where I'm going with all this is Pal's higher for longer campaign is now turning into higher for even even longer and why that matters is this is why the lag effect is so important is is policy acts with a lag effect when the FED pulls a lever it takes a while oftentimes measured in quarters or sometimes years for the impact of that policy change to be affected in in the general economy so when the interest rates go up um they they start slowing economic growth now there are other things that are goosing economic growth like all this liquidity we're talking about um but there is this underlying um slowing that's going on in the background as we hang out at this higher cost of debt the gravitational pole of of that slowdown of the economy begins to become heavier and heavier and heavier and basically this is one of those systems where time is your enemy meaning the the longer you hang out here and the longer it takes for the the lag effect to arrive when it does arrive it's going to linger and last for longer and so I think the the great danger here and not wrap it up with this is that basically the market and most investors have just dismissed the lag effect that's not going to happen I I argue and I've got a lot of data here we can talk about if you like but I argue that um know the lag effects alive and well it's kind of been being masked right now by all the liquidity that's been pushed into the system but that liquidity is unsustainable at these levels and and at some point you know uh the fed's hand gets increasingly tied to deal with it because more liquidity leads to more inflation that's exactly what the fed's trying to get out of the system and that's also toxic for the administration as we get closer to election time so a lot of the things they're doing to to try to keep liquidity High they're going to have to start reducing so my point is is you know at some point when the lag effect arrives and proves to proves everybody wrong it says no I'm not dead I just took my time in arriving the length of time it's taken to arrive means it's going to be pulling the economy down into slow economic growth potentially recession for what could be an equivalent period off into of the future and so no matter what we try to do to Goose the economy once things start to slow down those policy actions have a lag effect too so we may be stuck in this slow growth whether recession or stagflation I'm not entirely sure which it's going to be we can talk about it but we could be lasting in that period for a lot longer than the market is currently expecting so much to unpack with what you said I I would like to say though people don't look back at history and and when and and I think that's a that's a critical mistake if if you want to see where you're going or plan for future you have to take a step back or a look back at history and absolutely I mean it's been less than a hundred years since the Great Depression and when you look back in time that's not a lot of time so but between the Great depression and you know Wars the great financial crisis was in there there were a lot of other uh dips recessions uh the housing market we saw it and um you can look back every decade or so we have some type of downturn some type of Correction the problem is is that we never let it fully correct or reset and we put Band-Aids on it and we you know like you said we feed a more sugar cereal because it tastes good and you know it satisfies you for that moment and then you you find out just how bad it was for you but the the problem is these bubbles look Adam you can look at it I can look at it I've been saying since 2022 that the housing market is going to crash I still believe that there is no way it can't if you look at all of the indicators the the uh the amount of money that you need to to own a home uh the expenses the inflation on repairs people can't afford it the fact that millions of people have struggled paying their mortgage payments and have been bailed out to the tune that we're chopping principal mortgage balances that they committed to contractually out of their payment and casting it to Second mortgages interest free the workouts are crazy the Band-Aids are we emptying the box it just shows you which makes me question the Federal Reserve manipulates the markets I mean that's what they do but look what you said the pal came out and said seven rate Cuts or whatever it was he said and you watch the stock market take off right this type of manipulation is even more dangerous for everyday Americans well AC for people across the globe but especially what I'm talking about are our people right here in the US and they have no idea just how fast they can go and their their positions can be wiped out and they can be on skid row and be you know 60 years old and not have enough money what they thought that they could retire have their pension plans wiped out for I mean this is crazy stuff that's going on right now couldn't agree more and uh well let's let's let's let's tackle some of those things in order here so um you talk about uh asset prices in general so um I'm G to I'm going to share a couple of charts here if I can um so this is showing the relationship between stock prices and real yields right this is measuring the S&P index versus uh an inverted chart of the US Treasury 10year yield um and you can see see in the first the left half of the chart these were very positively correlated right um you'll see starting around uh the end of the year um this is right after pal basically you know dumped a whole bunch of sugar cereal into the breakfast bowl of the market um stock prices took off where um interest rates uh or yields sorry on the US Treasury tenure um started Rising right and and so that that that positive relationship all of a sudden massively diverged right and um uh that can't sustain um basically one one chart the S&P is is sending a sign of exuberance and the other chart the chart of a tenure is sending a sign of caution um they can't both be right and what's interesting is over the past you know two weeks we've all of a sudden seeing that Gap to start to close a little bit right and that's been with the big sell off the market head it was down about 5% over the past 10 days or so um or maybe past two weeks um and uh highly likely these two lines are going to Recon converge um and it's just a matter of whether real yields are going to come down a lot or whether stock prices Financial prices are going to come down uh and given the the environment that we have right now Todd where inflation's rising and um you know the FED is not going to be doing um rate Cuts anytime soon uh and we have you know a lot of the issues that you just mentioned and more that we'll talk about seems very likely there that Financial prices are going to come down now similar with housing um I'm going to put up one more picture here if I can uh I just was reading this the other day that um that 40% of renters um are don't think they're ever going to be able to buy a house right that's up from 27% of renters just a year ago right so that's almost a doubling of people who are saying houses are so expensive I'm never going to be able to buy one I'm priced out of the market forever and what's interesting about this list is you'll see the first reasons for why they think they're not going to be able to afford a house are are price related right they're too expensive I don't have a down payment uh mortgage payments are too high um but then right beneath them is regular upkeep and maintenance would be too expensive now you and I have talked about this Todd I think last time I was on the channel which is that not only have home prices gotten to the point where they're Out Of Reach for the majority of home buyers but just the cost of Home Maintenance home ownership right Insurance paying contractors to come and you know fix the Leaky Roof and whatnot those costs have exploded with the wage inflation that's gone on so we have this really weird moment in the housing market it's almost kind of like a Wy coyote moment but but given how uh transactions have basically collapsed right um given that um so many current homeowners uh are sitting on these really low mortgages so that they don't want to move uh in fact you know many of them will have to downgrade uh given what they could buy for what they get for their houses right now in this market um that the only transactions that are going on are kind of amongst the the already wealthy right um and that's what's sort of propping prices up right now that can't last forever as you and I know you know organically there are transactions that have to happen every month because people die they lose their jobs they get divorced and whatnot and because housing's priced at the margin that's that that will eventually begin to pull prices down and actually if you look at median prices of uh let me see if I've got this chart here um I don't have it handy uh but um median prices of uh new homes uh have uh decreased uh pretty substantially in just the past year they've come down 20% uh since uh since their highs just a little over a year ago multif family uh and apartment properties their median price is down 28% office properties are down negative 37% so we're beginning to see some of these Corrections uh already happening um of course you look at markets like Austin you know they're in a world of pain right now and and you know I'd love to hear your thoughts on this but I think they're really offering a glimpse of what to expect in you know coming to to many other cities in the not too distant future and and Todd you know we're talking all about this just in the context of these this higher cost of capital that I've talked about um we haven't even talked about things like uh you know potential job losses right like if we enter a real recession where there's real job losses at scale you know then it's kind of like ktie bar the door right um so yeah I think I think even even assuming for a second we don't have that type of scenario we just mathematically have to have lower asset prices for this whole lag effect reason that I've been talking about this reminds me so much of what we watched happen in 2005 it started in 2005 the housing uh crash of 2008 a lot of people they say 2008 was sort of like um everyone could witness it could see it but what people don't realize is that new home builders see it first mhm and the reason is because the obvious they have have to sell the home when you're talking about people that uh their asset is in their mortgage their sub you know 4% 30-year fixed rate mortgage when you're talking about people that don't have to move or that would be giving up their house payment and would spend actually more money a month buying something smaller it doesn't make sense for them and we also see where generational housing is coming back very strong because Mom and Dad are buying buying the house and moving their kids in with them and maybe it's just Mom maybe it's just Dad but they're using mom and dad's money and they're all living together this is showing up to be not so great uh to people that realize they can't live with their parents without some type of Separation like an in-laws quarters uh you know it does become problematic imagine now all of a sudden your mom or dad's telling you how you should be raising your kids so there's a lot I'm hearing a lot of story where that's not so great but let's just talk about the fundamentals the numbers don't work people are broke they own these houses if they if if they're one of the uh 20 million homeowners or let's just say it's 10 or 15 million of these homeowners that were firsttime buyers in the last four years that have realize that they paid a lot for their house and especially if it was in 22 or 21 but they're realizing now that things break mhm and they have to fix them just like you said and they don't have the money to do it but fundamentally it doesn't work but when we see now headlines I think it was yesterday Sacramento times I think it's Sac I think that's what it is Sacramento times you would know they just published an a um a post that said the five overpriced housing markets in California cities in California to buy a house that's the kind of headlines that tell me it started and here's what happens and I remember when I was building back in 2005 when the headline Baltimore sunp paper said the overpriced Baltimore housing market that's all it took right so who wants to when you tell somebody if I say to you Adam you're overpaying this housing market is overpriced what are you doing well I don't want to overpay I mean that was the way people thought and they're going to think that way again it's just taking the lag effect all of a sudden that's the kind of article that starts to impact well things aren't as great and now you talk about new home construction you're talking about 20 23% median price reduction in they had the worst October that they've had in history or decades new home builders since the GFC for sure but they had the biggest price downturn in October 23 they had a little bit of a rebound they modified the homes by some of them making a little bit smaller house to make it more affordable but they're sitting in areas like Austin they're abandoned communities but my point is is that's where it's showing up now it will get to the rest of the you know existing home uh Market eventually it's going to show up bad shape we're in bad shape absolutely and again I'm going to kind of hammer this concept of the lag effect right where it just it it it takes time to arrive right but the issue is is once you start to see it arriving it keeps on coming and it keeps on coming speeds up it speeds up so um you know to your point right now um so here's here's a stat that that I think is just emblematic of what you're saying right um a recent Forbes advisor survey revealed that nearly 70% of respondents either identified as living paycheck to paycheck or even more concerning reported that their income doesn't even cover their standard expenses right so you know as I mentioned we're we have this housing market where we are dramatically shrinking the available pool of buyers right and nobody really cares at the moment because prices on average are still supported right um and that's sadly just the way that that markets largely tend to operate is is that people tend to not want to care unless they have to right so it it's not going to be until the contagion from Austin starts creeping into more and more cities where you know people start getting the memo of um okay you know F first off all the buyers that are at the margin where it's like I could buy if I really stretched myself but why would I if prices now are clearly starting to come down I'm just going to wait times on my side right then you have the the the sellers right who right now they don't want to sell it's not in their interest to sell right let's let's all hang together and solid it but you know if if asset prices start coming down like they're they're they're starting to um worry a little bit more about the future of their 401ks and what they have available to them for retirement or for many people their house is their retirement right that that that home equity that's for a lot of people like that's that's what they think is going to fund their retirement um whenever they sell uh if they start getting worried that prices are heading down in the future well then they've got a first move or advantage to bolt from The Herd right let me sell now yeah I'll take a 5% haircut or whatever but better than hanging on and and potentially getting a lot less and then that starts a panic and that starts to feed on itself right you're shaking your you're right on the money man I tell you yeah so here so my general Point here is just that like we have we have all this dry Tinder right in the housing market right we've got we've got you know this this one huge mathematical disconnect right there's the Seesaw let me get in the camera here there's the Seesaw right where interest rat go up prices need to come down that didn't happen this time and again it's one of those reasons why people have just disregarded the lag effect this time oh it's different it doesn't apply in today's circumstances um so uh we we haven't had that correction yet but mathematically it needs to happen right then we've Shrunk The Available um buyer base um of the buyers that we have they're increasingly getting pressure from cost of living so their ability to afford houses at any price is starting to go go down um you know we have uh you know we keep being told how great the the jobs Market is right now but that's if you look at the official data and there's a lot of the I'm sure you've probably seen some of the recent articles Todd that show that um initial jobless claims have come in at the exact same level for five out of the past six uh numbers in the series right clearly some sort of goalseek uh number from the the guys that are writing the models at at the s whereas if you trundle over and you look at things like um Challenger and Gray's layoff trackers um or if you look at um the the warn notices which companies are required to give if they have above a certain number of employees saying hey we're going to do layoffs you know six months from now those have been exploding all year right so we're already seeing a lot of other data that suggests that um the ability of the general populace to afford anything is getting more and more compromise and of course if those layoffs ever get to the point where you know they start entering recessionary levels then yeah I mean demand for housing is going to have to take a hit so we have all this dry Tinder that we've been talking about all we need is a is a match and that's you know kind of you were talking about 2008 like there were lots and lots of warning signs building up to to 2008 but you know what housing still pretty much hung in there the markets hung in there just fine it wasn't until lhan surprised everybody and that was the match and then the whole thing just went up I I I think we have an increasing danger of that type of scenario this time around I'll give you my opinion on why I think that the home prices are still going up even though not to the tune of what the headlines are telling us but first I want to talk about the jobs reporting and I'll just ask you are you going to trust your job stability and strength strength of the job market by the job that they post that is not yet filled or the company that cut 1,500 employees right which one holds more strength right obviously I'm going to trust the layoff more than I will you know when a company a tech company publishes 50 jobs that they don't ever fill and they never even call the people back when they fill out their you know uh res send a resume and create cover letters and they say I never heard you know I've applied for a hundred jobs and I haven't heard back from one um so I'm not trusting that but when you talk about asset prices and you're right I mean we are one step away from watching this whole thing implode and why haven't higher interest rates worked why haven't they really knocked the asset price down and that's a big question that I hear from people all the time you know we at 7 and a half percent 30-year fixed rate mortgage now obviously the prices didn't come down even though 7 and a half historically is not a bad mortgage rate and five decades I think it's 7.7% has been the running average but let's just say 7 and a half% you would think coming from 2.75% you would think that this would be devastating to asset prices the housing market but it has let me just interrupt if two years ago they had told you and I that mortgage rates were going to jump up to that we would have said oh yeah prices cratered it's going to implode the reason why it hasn't is because the buyers believe that the asset prices are going to continue to go up MH and they believe that the interest rates are going to drop they may be sadly mistaken because if the asset price drops they're not refinancing at a better interest rate so you may get back to a 5% mortgage rate and you're at 7 and a half now but if your asset price drops if you don't have $150,000 plus closing cost or to go into a new loan you're not going to be able to refinance so I think that people they they're just um they're not the exuberance is outweighing the lack of inventory and the ex ere exuberance is outweighing the potential for disaster absolutely so um I was interviewing Jesse Felder not that long ago and he calls this um extending the unsustainable and he sees this in a lot of other assets but housing is a classic example what you're talking about as a classic example of this right which is just extrapolating today's Trends and just pretending that they're going to they're going to head out there forever uh and I'm really glad you brought that up because one to my my my previous comment we are going from an era of higher for longer to you know high or higher for even longer that's the point I want to I hope folks take away from this discussion here which is that this higher cost of capital is going to last longer than anybody who thought it was going to even just a couple of months ago right um and so uh if you're waiting for the Cavalry to arrive like you said people are expecting home prices to continue to go up and interest rates to go down the interest rates to go down part is is not going to happen on the timeline that that the housing market right now is currently expecting it to and when it does this is the second point it is likely unless we're in a huge crisis which we might be um but if not it's likely to happen at a much slower Pace when it does start happening um to to ride to anybody's rescue so let's say the three rate Cuts we we were supposed to get this year we don't get until next year so now it's the end of 2025 and mortgage rates have come down from 7 point whatever what are they write now Todd well I mean it depends on your credit score but you could be at 8% okay if you if you don't have a 700 credit score unless you're paying points I mean you're going to be north of seven and a half% right now I mean it's okay gone up so if they go from seven and a half to eight to 6 to 6 and a half by the end of 2025 that's not making a huge difference to you to your point right it's it's it's not you know that's not supportive of you know housing prices that should be vaulting ever higher from that so you know the the the point is is that the market is largely doing a lot of magical math right now and Peter Atwater um well-known behavioral Economist and he focuses on sentiment he focuses on sentiment because it's so important he says basically you know markets they reach these tipping points in sentiment where you know like right now in the stock market or in housing the Bulls are in charge right and and prices will go up and sustain right up until the point you switch to where there are suddenly might only be the difference of one or two people but you go from being net bullish to net bearish or net optimistic to net pessim pessimistic and then once you reach that Tipping Point then the activity really has the potential to start building momentum at an increasing Pace in the other direction and that's that's always what catches the market by surprise and I think you know from from what I hear you saying I think you feel like the housing market is just waiting for that moment where you get to that magical number where there's just all of a sudden net just a few more people who think you know what I don't think these prices are going to keep going up like this in fact I'm now worried they're going to start going down then the entire tenor and the entire activity in the market starts changing Adam what about this scenario what if prices just flatten out what people don't realize is and depend depending on which state you know which state you live in uh transfer Recreation fees can be quite costly mhm and when you sell real estate we like to say that you need about 10% equity in order to come out flush right to where you're not bringing money to the table now if you put a lot of money down it doesn't matter you may pay off your mortgage after you close but that doesn't mean that you didn't lose money lose the down payment money so let's just say for the next five or seven years or maybe 10 years this could be a decade long Flatline at the very best case scenario where we see 0 5% growth price growth let's just take that scenario most people don't stay in their home more than seven years mhm 7 to n years would I would say nine years would be the absolute outset to that so regardless of whether we take this big asset price dip or not if it just flattens out this would still be devastating for a lot of people that will have to sell especially for those that want to sell within five years and and we take our youth we sometimes I mean we have to look at the pattern of of these firsttime buyers they went to universities they moved every single year that they were in college maybe they started out in the dorm then they you know got an apartment with their buddies then they got wanted a house uh you know so they moved around a lot they're not used to staying in one spot necessarily they think that this is a starter home they get there they go oh my gosh it was limited inventory I I I don't like the neighborhood anymore I don't like the area I don't like the traffic noise whatever it is and they want to move they're ready to go we are already seeing where people bought homes in 22 they want to get out I just had a client we just were selling their house they moved back home they're like we're out of here we you know they bought it two years ago so when you look at this type of behavior I think financially we're underestimating the devastation of those that made bad mistakes over the last four years I well totally agree and and you know what what's terrible about um bad policies is it always ends up damaging those who can least afford it right it's always the most vulnerable that get get hurt the most um and in this case you know it is our our younger populations like I said earlier you know most of them are renters right now still and you know 40% of them think they're never going to own a home at this point in time right um those that could buy a home a lot of them got caught up in the pressure of the fomo uh that that followed all the stimulus during Co right and you're going to get pressed out of the market if you don't get in now so they all scrambled to and your point they're waking up with a hangover at this point wow I probably overpaid I probably couldn't afford this home and gosh I don't I don't like the neighborhood I don't like the house or or um a lot of cases you know people thought that they could work from wherever because we we were moving to a work from home economy and they moved to some the promise of some new city and then they've realized my gosh I don't I don't like this place nearly as much as I did I have uh realtor friends up in in Idaho and I was talking to them back in 2022 and this was phenomena was going on and they were like yeah we we've seen this before at previous booms up here and we always say just give them a winter and we know that you know after one winter a good chunk of them decide I can't I can't hack it here this is too much snow and they end up having to leave um so you've got all that going on and so uh even to your scenario like even if we just hang out here for let's say it's a l decade right we wait for for for um value to to catch up to prices over the next seven to nine years or whatever um you know remember the reason at least right now the reason why the FED isn't going to be lowering rates is because inflation is remaining sticky right it has an inflation problem so you know even if home prices aren't moving up anymore even if you're a homeowner um you're you're getting continually punished by this increasing inflation right so all of a sudden if your house isn't appreciating anymore but your cost of living keeps going up you're you know on a net basis you're worth less every year uh and again back to the the people who get injured uh the most are are are the more vulnerable you know if you're an existing if you owned your home prior to 2020 odds are you're sitting on a good deal of equity and you're sitting on a really low mortgage but if you bought after 2022 you know you're not um in fact you might be sitting on on on losses and a pretty expensive mortgage and then you add this cost of living into the the mix so you know it's it's it's really rough on on uh the more disadvantaged cohorts and and and the reason why this is really meaningful to me and T I think you're the same way is you know increasingly my concern this is a very high level after you know years of doing what I do talking to people about the economy I'm increasingly concerned that um America is in a lot of the west but but America is is turning more into an aristocracy than a meritocracy um where the promise of hey you work hard you can grab that brass ring and live the American dream that's getting more and more just realistically out of the reach of more and more people and that The Spoils of the system are concentrating into fewer and fewer pockets and you know from a from a home perspective and you referenced this earlier like if if you're a millennial or certainly a gen Z the biggest determinant on whether you're going to be able to be a homeowner is how wealthy your parents are right and it's it's not fair right and it's it's it's you know there's there's a lot I wish we'd be doing differently I hope we do decide to to make some policy changes in the future but we can't hold our breath for that we have to live with the world that we have and so this is sort of one of those things Todd where I think you know people like maybe accuse us of being you know Perma Bears or whatever um I'm not trying to be I'm just trying to literally call it as I see it and and and help people understand okay if that's the case then you need to work even harder and even smarter with your wealth to be able to try to be one of the ones that succeeds in getting that brass ring wouldn't it be better to just be truthful with people and say look you know the inflation sucks uh you know it's not going away we can't just bail you out we can't just print more money but let's let's talk about Solutions maybe we need to teach people to get their side hustles going maybe we they need to realize that they need to be more motivated than throw their hands up in the air and a lot of this would just be being truthful with them like we're doing and telling them hey look you want to say we're doomers this is reality if you look at what we do Adam and you can sit there I mean and this is the problem with politics right now I've never seen a time where people hate each other more the the left and the right and you can't talk about anything because you know and we watched I mean through the pandemic we watch families get broken apart but if we actually taught people how to get through this look we need to deal with this problem right but the problem with that is that doesn't help the elite that they it goes against their narrative they want us to be in this position they want us to be arguing with one another they want us to be finding ing our groceries if I mean that's the only thing I can put together because if they didn't they would be coming out with more solutions that teach people you talk about financial literacy all the time we don't do a we don't do the right job teaching people how to you know be responsible with money right we we allow these Banks to prey on our youth by giving them credit cards when they don't even have they're in college and Discover Card sending them applications and giving them you know $1,000 credit limits and they they don't even have a job right so I've got two daughters in college and that's the first thing you get when you arrive on College and open your mailbox for the first time it's just stuffed with credit card offers yeah yeah so when you look at so let's talk about the people because you said something about the equity that they have in their homes and you're right but if you purchased your home in 2019 or before man you were really celebrating at the pricing of what your home's worth right now right but you also made a valid point they're still stuck with the inflation of today to fix things so they're not fixing it in 2019 prices they're not spending 8,500 for their new furnace or spending 25,000 you know for their their their new HVAC system so when they were buying it in 2019 their job didn't necessarily go up 40 or 50% in take-home pay you know or gross pay so what do you think as far as you know practically speaking do you think employers are with with and and and I want to get your opinion because you were talking about contraction of the money supply I don't think people pay attention to that I don't think our Federal Reserve pays attention to that as far as in their projections maybe they do but when you talk about contraction of the money supply you're also talking about contraction of the credit Supply and that's affecting employers and that is that will affect their ability to give raises to their employees so kind of what is your prediction if you say all right let's say that we can soft Land This Plane and I know you're not saying that you don't believe that but let's just say or no landing at all we just continue and like wow this is great and the asset prices don't take a hit well then with that in order to sustain that our jobs Market has to do really well our employers have to be profitable and so much that they continue to give raises great raise increases for people to continue to afford the inflation is that practical I I don't think so um so yeah for for it to be um well I was going to say sunshine and Roses but but just for it to continue to be summer right forever um we need to have sustained economic growth uh above what we have right now uh to basically Drive corporate profits and then drive wages right growing real wages right the global economy has been in rough shape recently the US has actually been the the best of the bunch um but the US US economic growth is slowing and what are higher for even longer interest rates going to do they're just going to slow economic growth even more so even without something systemically breaking under these higher rates just just sort of status quo the economy is going to be growing less and less at the same time to bring back our old fund the lag effect um Corporate America like a lot of homeowners you know they they levered up with cheap credit when cheap credit was available but that's now coming up for its maturity is now coming up Corporate America faces this big maturity wall over the next couple of years where almost a billion is going to um come up for maturity this year more than a billion is going to come up uh in 2025 similarly in 26 so these companies are going to see their cost of debt jump in most cases more than double right so what what are they going to be able to do when that happens well that's going to drive up their interest rate cost their cost of Debt Service um and they're going to have to make up that difference somewhere else in the business to cut costs right well pretty unlikely that they're going to be able to give really generous wage increases in that in fact they'll probably be freezing wages they might even be um freezing hiring they might even be laying off workers I think it's probably going to be more the ladder as this goes along right so realistically looking at at where we're going um it it seems like the opposite of of the conditions we'd need for that eternal Summer right in in the housing market that you're talking about or just in the general economy that you're talking about um and uh and we're already seeing you know we we we had uh two years of negative real wage growth um as inflation really got going um we did start to see that creep into wages we have had positive real w wage growth for about the past year but the pace of that the rate of that rage growth is is is uh declining at this point in time and so you know if we start getting into the period I think we're going to get into because of this higher F longer um era that we're looking forward at now um corporations are going to have to start pinching and as the cost of living continues to rise and people don't get relief on that they're going to be contracting their consumer spending anyways we have a two-thirds driven consumer spending GDP so as consumers track contract their spending and as um the corporate maturity wall forces companies to you know freeze wages or start firing people that's going to increasingly contract consumer spending and of course that begins to create a vicious cycle where less consumer spending means even less corporate profits which means they have to lay off even more people and then people get they lose their income or they get scared they're going to lose their income so they tighten their per strings even more and it starts heading downward right so um look no one has a crystal ball is it exactly going to play out that way who knows but uh from all the experts that I talk to to me that feels like the more probable route ahead of us you know I'm not an economist and I learn more from people like you I mean I'm I'm a real estate guy I'm a contractor by heart uh I mean that's how I made my my living my my Adult Career I spent uh you know building things and creating things doing uh labor jobs that a lot of people nowadays don't want to do um hey you're you're the pumping heartbeat of the economy my friend I tell you what and now we're gonna find out where uh you know the the blue collar workers actually um they're going to be more needed as time goes on because people don't know how to fix anything you know but when they actually do real work too right I mean having having spent a lot of my career in in White Collar you know uh paper pushing uh Excel modeling powerpointing you know uh careers uh there's a lot of jobs in in mainstream Corporate America that just do not create any real value and you need to you know but it's important that you stay well and healthy because what a lot of people don't realize is when you make a living with your body uh you know working every day going out and doing physical work it's very important that you keep that body in tiptop condition and health because that is your you know and that where you can do a white collar job when you get into your you know older years but it's kind of hard to go out and lift I mean you know do physical labor 10 hours a day but you know when we talk and so with with saying that I'm not an economist I'm you know I'm a I'm a practitioner I know when things don't work right I can I I've um I've been studying for 35 years profit and loss of my own company right um financial statements balance sheets I mean I get it I know what what you need to do to remain profitable in order to offer higher paying jobs and one of it is not wasteful spending you can't you have to be smart with your spending but when I look at the fed and I say and and one of the things that I believe is that when we talk about higher for longer they're in a position right now where they've kind of found the sweet spot because they need inflation not to be at 2% they need inflation to be at 5% because if they don't reduce the debt on the the balance sheet for the United States we're not going to get foreign investors to invest in our debt right if they see that we are completely exploding and and this this debt spiral is a death spiral and so we're we'll lose the foreign investor money so we have to do this quantitative tightening right I mean is that is that correct I mean don't doesn't the FED want inflation uh the FED wants manageable inflation right it wants The Sweet Spot inflation where yes inflation helps the FED because it lessens the cost of the interest pay the the real cost of the interest payment that they need to service the debt um but they don't want too much inflation for a couple reasons one because that Spooks investors and investors then demand higher interest rates on the debt right so that it makes the debt problem even worse and in parallel with that you just have a huge domestic issue investors buying what oh investors buying the debt so so um one of the debates that's going on right now which is um If the Fed can't get inflation under control like let's say it's a year from now and inflation's at 4% still maybe even going up to five whatever there's a lot of people that think the Bond vigilante is it's an old term but that they'll show back up and they'll say you know what fed you don't know how to get inflation under control we've lost faith in you and therefore if we're going to buy your treasuries we want even higher rates of return offer just higher yields offered to us to make up for what we think we're going to lose in future inflation right so it actually begins to make the debt expense issue even more problematic for the FED interesting and of course like I said when inflation's you know high enough internally you get all sorts of domestic push back and issues and we've been seeing that over the past year so I don't need to talk about that for anybody do you think we can trust the numbers the inflation numbers I mean when they say 3.1% I mean I don't think it's that low is I know it their numbers have been you know woefully beneath what I think the average household experiences um and will that continue to be the case going forward I think absolutely so I think they'll underreport it you know I think they they they want nominally they say they want nominally 2% inflation I think they're pretty happy with six to s% sort of Shadow inflation in the world and I think that they can you know they can they can use those numbers to kind of convince the rest of the world they've got inflation under control enough but it's it's it's helping enough of the the cost of the the true cost of the debt that it's it's it's working towards their means um but but you know a lot of people give the FED way too much uh credit um the FED has a crude set of tools it's basically just got like two big levers it's got interest rates it's got yeah whether I'm going to QT qt or QE yeah or some call it a bazooka right it's not a surgical instrument right they have a soul and a hammer yeah yeah um and and they act with these lags right so it's not like a scalpel where you can just get a very fine result you kind of pull it and then you wait a bunch of months and see did it kind of have the the impact that we wanted to so um but but you raised two two things that I think are worth talking about um one is we don't need to get too into this but um we've been talking a lot about the FED honestly I don't think the FED is really as much in the driver seat these days as I think Congress and the administration are um I I think fiscal policy is having a more a greater impact on on what we're seeing happening on the ground right now than monetary policy is having and you you you gave mention at the beginning of this discussion to an interview that I did recently with former uh Federal Reserve it was the CEO of this um Kansas City Federal Reserve this is Thomas hanig this was one of my top favorite and I think top most important interviews I've ever done uh he ran a Regional Federal Reserve Bank but he also um was a sitting member of the fomc during the great financial crisis and when Ben banki was rallying you know the board of the FED to vote for QE uh hanig was the loan toenter and he holds the record at the FED for the most the longest string of dissenting votes uh and they they obviously decided to go on and do QE anyways but but hunting was coming out and saying hey look this is going to contribute to an explosion of debt uh it's going to eventually you know bite Us in diminished purchasing power of of the dollar uh it's going to contribute to wealth disparity uh everything he he predicted has come true right and so talking with with Dr hanik about the Fed was completely eye openening and folks I'm sorry to give a Shameless plug but but if this interests you at all highly recommend that you go watch that that video um I didn't intend it to be like hey we're going to tear down the FED in this interview but I did warn him at the beginning that I've got a lot of you know pointed questions that my my viewers have and he said fine ask me anything and kindly answered every question I asked very clearly and and uh in detail and um and you know basically said to a certain extent not in his words these are my words but it's as bad as we all think it would would be uh but he said right now he said actually the FED policy is probably where it needs to be right now given the the state of the economy and inflation and all that but fiscal policy is off the rails and he said you know uh in the long picture this all ends in basically a destruction of the purchasing power of of the dollar and other all the other major Fiat currencies because all the other central banks and and nations are basically pursuing the same policies um he said to to avoid that in the near term we really need to get our fiscal house in order and I said okay great well you know what are the odds of that what are the odds of our politicians actually agreeing to tighten their belts because they can see some of the longer term issues that you're raising here and you said oh pretty much zero right so uh that's accountability yeah I mean it's accountability and you you were sort of saying this earlier about how our politicians are just not you know they're not acting in the interests of the populace and it's true I mean we we we very much have a a captured uh a captured uh form of governance um by special interests talking to to hanig um you know the FED is supposed to be independent and it holds that Independence up you know uh waves it to the world but hanik said oh no no by far the two voices that speak the loudest in in influencing fed decisions are coming from Wall Street and coming from Capitol Hill um and even worse he said that uh a lot of times the FED will act for Optics and then agree you know we we let's make this decision let's run with it and we'll figure out how to make it work later right so you know we all would hope that the FED is truly independent we all would hope that it's making uh very specific decisions with the actions that it takes because it has some sort of master plan to bring things to some sort of surgical outcome and uh and hanig you know he he had some positive things to say about the FED but he basically said on average he's like yeah no the FED is definitely flying by the seat of its pants way more often than it should be when you say the influence is coming from Wall Street or when he says that Wall Street and Capitol Hill specifically with Wall Street what does that look like Corp corporate interests you know it's banking Banker interest J Morgan Chase yeah I I I I probably should have said Corporate America more specifically but but absolutely you know from the banking industry but also from you know all the other kind of corporate cartels that are trying to preserve their advantage and and Advance it right so you know um sadly it just seems that you know the question we would all hope would be on everybody's mind which is how does this best benefit my constituents gets overrided by okay the big donors that are influencing both my you know my reelection chances as well as the fat you know board seat I'm going to get once I'm done here uh those tend to be in the driver seat and you and I were talking before we turned the camera on here about you know the recent package that just got passed for you know all this bloat for for a lot of uh you know overseas Adventures uh that may or may not have American interests at heart but but basically a big goose egg for a lot of the really important domestic issues that so desperately need attention right now yeah house approves 95 billion Aid bill for Ukraine Israel and Taiwan and I'm not I'm not diminishing the importance of of preserving you know America's geopolitical influence um but I know a huge part of that that uh campaign there around that recent vote was okay what are we doing about the broken border here um you know we've got a a massive need to come up with some sort of strategy and and stop the hemorrhaging there and it basically got I mean effectively nothing in that bill from what I understand what about I mean when we talk man we it's crazy we're spending I mean like you said we're we're dealing with we don't even know who's coming across the border I mean they have we hear stories about all these terrorists coming in and this is crazy what's going on I mean I don't understand it really yeah we again you and I were talking about before we turn the camera on how it oftentimes feel feels like we're living in a world that's written by The Onion um so huge hugely sensitive topic but but but we we can't afford to not talk about it because it it is so important socially economically it it it it's an elephant we can't afford to ignore in the room and like you I think we can have a respectful uh uh you curious-- minded exploration of this without without slandering anybody or any groups right and um uh I want to get back to how it relates to real estate in just a second but but just to be super clear for folks on this topic um you know uh pretty pretty much everybody in the US immigrated here you unless your your ancestors were Native Americans you know everybody else that's here is is is a johnic come lately um uh my two cents on this and I've talked a bit about this on on my channel is look I just think you need to have an immigration strategy right that's what you need to start with right you have to have a plan okay how many people you know we we there's there's 8 billion people in the world right pretty much all of them want to live in America right we probably can't handle 8 billion people how many people can we realistically handle and what pace do we want to get on there what track do we want to get on on there with and so how many people a year is that okay great once we have that number what skills do we want to have right what what type of of skills do we want to bring in through the immigrants great and then we'll have some percentage in there for the amnesty and hard luck cases right um and we just come up with the numbers and say okay what what are they and then we basically resource our borders to the the point where they can affect that strategy bring in the as many as we've said we wanted to bring in of the types we want to bring in and tell everybody else sorry no room at the end this year you know for the rest of you maybe next year right that that makes a ton of sense we're so far away from that right now it's crazy and that's why we need to be having this discussion about how do we get to something that works in the national interests of the country that's Humane and respectful to to all parties right okay that being aside um so these bodies that are coming in at the volume they're coming in right now they have to live somewhere right so they they're going to have some sort of economic impact on the real estate market in some way shape or form sounds like you're not seeing it in in the the real estate for purchase market yet and I would agree I wouldn't expect like I said earlier we we' we'd see it there but could it be pushing up the rental market to a certain extent well Adam I have to ask the question who's paying the rent right and may may maybe it is a legal resident that it knows these people and is is working with them as sort of a front I don't know do they have but do they have a job who's hiring them yeah well good question I mean I I live out in California where obviously there's a lot of lot of these undocumented workers that get work because it's lowp paying work you know hard work out there in in uh in the fields um and I don't know if they can convince a a landlord to rent them but but they have to because they have to live somewhere they have to pay the rent and so that's the big that's the bigger issue than if we're not making a pathway to citizenship so are you going to come down on the employer for hiring undocumented employees that's the bigger question are you going to pick and choose what industry you will allow it in so if you're not giving somebody a uh a social security card or you're not giving somebody the ability to get a job legally that's the issue that's the sensitive issue so you let these people in but then are you going to come down on the employers for hiring them one day come storm trooping their their business and find them or put them out of business because they I mean they have to work this is the bigger issue well it is the big so yeah and I sadly I don't I don't know the answers to this question I don't have the data um but they got to live somewhere and if they're not in a living Arrangement where they're basically able to pay their way um then I guess they're they're living off the state right I mean they're living in these subsidized hotels or these you know uh which they don't want to do I can't imagine that they want to do that no and and of course we're seeing more and more articles about you know uh these recent immigrants being placed in schools and you know then and then there's clashes between the immigrants and nobody's to your point like nobody's happy with this solution and if it continues at the volume that's continuing at it's only going to get worse and worse and worse so you know again like I said we have to care about this because it has both social and economic ramifications um so we can't afford to not kind of directly talk about the topic but to our discussion here there's still so much that's Unknown about the data uh that that's what really scares me is is we just don't know the extent of the issue because we don't have a lot of good data to rely on yeah 100% and the other thing is I mean we could probably have a conversation that would be really in-depth on this topic but it might not be good to talk about right yeah well sadly you're kind of Tiptoe Through the Tulips here you know what I mean it's like it's the word where we're in and you probably saw this uh this article the other day um there's you know we're in the sort of mind field you know Society where uh there's this company I think they're they're called sheets um where they've just been sued by the government because they uh they don't hire people that fail a criminal background check and because that disproportionately like if you look at the the people who fail the background check uh there's certain minority groups that score that are that are caught by that more than other minority groups and basically it comes down to the fact that this company which basically has a lot of like um convenience stores right she I've heard I mean they're big on East Coast okay so yeah so uh they uh they're just like well look we we we we don't want to hire people that have a track record of basically breaking the law and stealing um and essentially they're they're kind of getting you know sued to a point where it could put the company out of business simply because they don't want to hire uh proven criminals right so um look this story is probably a little more nuanced than that but it it's it's again the sort of crazy world we're in right now where decisions that you think would be just common sense can can actually put a company at existential risk yeah again a lot of topics and a lot of things that we never had to deal with you know 30 40 years ago uh and we've just kind of we've we've kind of glazed over I think the the immigration issue all the presidents have or you know when they're campaigning recently probably since Bush have really talked about um some type of immigration reform and you know when I talk to um a lot of people they say you know they really haven't done anything you know they they there is no real clear um you know there was the dreamers act and there were all these you know different um uh programs but but none of them really went very far and U there is no like you said there's no stopping the influx and dealing with what we have and and trying to come up with a a good Pathway to citizenship um and yeah and I think a lot of people are really upset about it and when you see these bills of 95 billion aid for Ukraine and I'm not saying look it's not my place do I want to see our children on Battle lines battlefields and no I don't want to see any of that and I think we're in a lot of situations we're really we're we're um we're playing with fire in some of this right in in a very critical time uh I'm not saying that we shouldn't be giving Aid I'm just saying that why aren't we focusing on the issues that we have here in the US why aren't we building more affordable housing why aren't we cutting red tape in order to to you know put the fire out that we have here in the US well I think it's because we have this perverse set of incentives and I mentioned earlier that a lot of Capitol Hill is is kind of captured right by these these special interests also too you know we we have uh we have a political base that's not only old right I mentioned the jocy earlier um but it has cut its teeth through its entire career on how do I divide up an Ever growing pie right it's been a great time to be a politician pretty much every year you have more money to right and even when we had this last crisis what do we do right rather than say hey look we're in a crisis we should like you know spend wisely instead we just said oh let's just give tons of money we can't afford to everybody right that that is the musculature of our political team our political players right so if we are entering an era like I think you know for all those reasons we talked about about the lag effect and the higher rates for longer and stuff like that that is era especially if it lasts long like I think it may um where what you need in your decision makers is somebody who knows how to intelligently allocate a a a a static or shrinking pie right and so you can kind of make the argument that we have exactly the wrong people in the job right now for what the needs are right so for them it's always easy just to say oh yeah you know Ukraine or whatever something else that I can get a cut of you know these money as we're spending sure I'll write that big check and and even when we go back to the stimulus programs and stuff like that like Todd you and I as humans our brains can't really fully understand how big a trillion is and that used to be kind of a magical number like I mean you talked about billions and hundreds of billions in uh DC in fact I can't remember who mentioned it but somebody said a billion here a billion there pretty soon you're starting to talk about some serious money well we kind of flip that in order of magnitude and now that's become trillions right and we basically between the monetary and fiscal relief packages in just the us alone during covid we spent over 11 trillion do I I'll tell you this nobody can understand how big that is and the ramifications of the interest debt service costs on that and and and all the distortions that it makes in the world it's one of the reasons why we're so surprised by all the actions going on right now um and honestly why the recession hasn't arrived yet I think is because we put such an unbelievably big pig into the python it's just been taking a lot longer to exit than we thought it would right so we're we have these people making decisions who just really don't understand the implications of the decisions they're making and they have these perverse interests so it's it's really a bad toxic combination let me just make one more point before I forget it because this is important and it sort of ties to um both the economy we're talking about and the immigration thing we're talking about I interviewed a demographer a guy named Chris Hamilton and you might not recognize his name but he runs a website called um economica and uh he produced a ton of charts I'm sure you've seen them Todd and um he focuses a lot on on debt and demographics and basically he has shown that uh the US population is um its growth is fast declining right um and uh that's very concerning for a bunch of reasons um you know one we're just having families later in life and and fewer children per household that's a direct result of younger Generations feeling like their future prospects are not very good right they just don't feel like they can afford to right that's a bad thing the the not only is our population grow shrinking but but when you look at what drives an economy what drives an economy is the size of the um the working group population that's 25 year olds to 54 year olds that cohort in America is shrinking it's actually fewer people on a year-over-year basis so we have fewer people in that cohort that's only going to get worse as time goes on so he estimates that hoping I got these numbers right but if if you look at Natural Born Americans that population base at current trajectories is set to start shrinking around 2035 like to be in net Decline and then if you add immigration into the mix I think that extends us out to about 250 but then America total population starts shrinking after that that's at current trajectories right so what that does is it raises a lot of a alarm bells that say Hey if you want our current economic system to continue to work the way it's currently set up is that it has to grow over time if you want that to continue we have to get our population on a sustainable growth track right and that actually makes immigration really important right I mean obviously we want to try to come up with policies or incentives or or just make things good enough here that that the people people who live here want to have families right but it the cruel math says hey you need immigration it's going to be if you want the current economic model to continue you actually need immigration to fill that hole so we really need a good immigration policy like we need that if we want to have our our economy uh to have the future we want it to have um now maybe it cracks open a debate at some point in time is is there a different economic model that we want to have and we don't have enough time to get into that but um but solving immigration is really really important to our own self-interests um let alone dealing with kind of the the particular pain points that that are our current lack of and is creating for us right now so again it just it just underpins the fact that like we need to have much smarter decision making and much more courageous decision- making to say hey look let's get everything that doesn't really matter off the table and let's focus on the key long-term crises that are facing us and try to get those things to a point where you know we're serving the long-term interest of the country but as you and I have said many times so far we we just don't have the right cast of characters right now doing that well if we want to be the largest buyer of GDP in the world we have to continue to allow people to come in to the country like you said I mean when we're not having children because we can't afford to do it or you have two you know two people working two jobs to make ends meet who's raising the kids and then what happens is child care is so expensive es especially for infants so now you're going to spend $1,000 a week dropping your infant baby off so that you can go make 800 a week I mean those numbers don't make sense the equation doesn't work but when we're talking about um we don't make anything here in the US I mean we're just we're we're we're Spenders and you know and and and we want everything done for us right so we we we're not building anything here I think if for long term we need to start doing more manufacturing bringing the jobs manufacturing jobs home and um and I think that that immigration needs to be a legalized path you can't just let people pour into the borders I mean you listen look I don't know it firsthand I haven't seen buses going down the street but you hear it um you know where they say you know these Governors are busting them up and dropping them off to DC and all these you know and and and saying good luck have a nice life I mean that's not that's not a way to deal with things we need to be focusing on this more this is a political issue it's a political football it's dangerous territory to tread in I mean the cancel culture is real uh you know the Divide is real me Adam you know as as we kind of U and maybe you don't want to talk about this and it's fine if you don't because I try and keep politics off my channel but we look we're coming down to the wire I mean November is fastly approaching I mean what do you think what what are the implications of or in your mind like what are your worries when you think about okay is it RFK is it Trump is it Biden is it whoever uh some people say I've heard people say you know they think Michelle Obama is going to jump in at the last minute or whatever you know and what are your thoughts on what will happen in November and what do you think the the implications would be um of whoever wins of whoever wins okay um let me get to that in just a sec um because you mentioned a couple things I just want to I want to tie a few more dots together um so you talked about how we need to have a path for the people that are coming into the country to to find gainful employment in a way that that makes their lives better makes our economy better right strengthens us right and knowing who they are is obviously an important part of that uh essential part of that so um I want to combine that with uh the challenges that that younger Generations have right now um to get gainful employment right even though we're told um unemployment super low and there all these you know more jobs openings than there are applicants um that is increasingly flying in the face of of both some of the data I mentioned earlier but also just anecdotal data and again I've got kids uh College age one who just graduated college and so you know I I talked a lot about kids at this cohort who are saying it's actually really pretty hard uh to to get hired these days because most companies they're not really actively hiring in fact let me just tell you this thing I talked to somebody the other day um who said uh I've been talking with Recruiters in HR uh and get a lot of candid Intel from them so this is somebody who's actually like cons doing consulting work to HR recruiters she said they're posting jobs that do not really exist uh or are not currently open for hire it's just for Optics um she said the economy is not in alignment with the data in the labor market uh and in the labor markets here in the US is absolutely quote frozen solid she's been in this field for 28 years and has never seen so few hires from cold applications and some such limp employer hiring interest right so part of that's economic just where the economy is right now but I think an increasingly part of this we we haven't touched on this yet but is the whole like AI boom right we've made it so expensive to employ people and and I railed about this before the AI boom in fact even before covid that we've been making we've been giving companies a huge incentive to try to shed as much human labor as they can right and to Outsource source to automate uh and and uh to now with with AI um adopt AI as fast as they can um and so uh you know we all see this when we go to the grocery store and there's self checkout now right you go to the McDonald's and there's kiosks right like all these on-ramp jobs to the labor force are getting removed and of course with AI That's going up the job Talent stack so it's going up into the the white collar jobs too so um we we have uh you know we're basically removing the lower rungs of of the job scale ladder both for our youth and I think for these people that we're bringing to the country there's a um a principle that's been in economics for centuries um K's called it uh technological displacement where he said that look if if technology can replace a human body it should right if technology can do the job better more efficiently it should do it you should swap out the labor with the technology but he said you got to be careful at the pace that you do it if you displace the labor faster than you can find a another productive use for that labor you end up creating a social crisis the cost of which is greater than the savings of the new technology adoption and I feel like we're running like totally head first into that right now and not even talking about it right um so I just wanted to make sure that folks uh we're keeping that on their their Horizon 2 around this topic now to your question about the election um look I'm not a political analyst um so I might disappoint folks looking for you know here's going to happen in Trump or Biden but but but here here is how I look at it though U as you know I I look very much through my economic binoculars um the current Administration um have a high degree of confidence has been doing absolutely everything it can to try to keep things operating as well as as as they can up until the election right it's and and that's why I think a lot of the official data especially the jobs data super head scratchers for us right you know we think inflation's higher than it's reported probably is we think jobs are worse than officially reported probably is right um the fiscal spending side I think a lot of that fiscal spending is to try to pump up the economy up until the election right um a lot of that stuff as I said earlier it you know we're trying to extend the unsustainable a lot of that stuff once the election comes let's assume Biden wins right he's going to say okay you know what like I've been I've been using emergency measures to get to to win this election this stuff has a high cost I got to let some of the froth out of this thing I need to lower the bar so that when I finish my term I can cross the bar right um so yeah maybe my first year year and a half is going to be Rocky as I let a lot of the stuff correct but then I'll finish strong years three years four I'll be good right now I think if Trump wins first off if Trump wins the bid administration's going to absolutely drop whatever they're doing to prop things up right and Trump's going to basically say great like let me let it all flush out I get to blame it on Biden for the next two years and that lowers my bar so then I can finish strong in years three and years four so I can kind of make an argument that no matter who wins the election a lot of the uh the the excessive extraordinary you know propping up that really shouldn't be happening right now will probably get pulled to a decent extent and we will likely see both an economics slowdowns SL contraction Andor you know pretty sizable Market correction as a result and I think it serves the interests of of the incumbent at least in that that following next year or so so I'm kind of on you know correction watch after the election yeah you think RFK has a shot uh like I said I'm not a political analyst um I'm I'm really glad that he is in the race um look you know we we have such a sclerotic political system the fact that it's basically Biden Trump you know when we had tons of time you know to develop a deeper bench on both sides and get new ideas and and and people that could maybe bring more of the country together than either of those two and we haven't you know it really shows kind of how broken our system is so I love the fact that there's a a new entrance and and uh you know I'm I'm very apolitical very intentionally um but I think a lot of the questions that that RFK is asking are questions that need to be addressed um and so I'm excited for that that being added to the dialogue and and um you know how disruptive is he going to be in the race I'll leave that to other political analysts but I'm I'm glad he's in there yeah I want to kind of circle back around before uh you know we uh close up here yeah by the way this conversation's gone in a ton of directions I didn't expect it's going to but it's so fun to talk about this I know I know I know um I I think uh I think people they're they're definitely people definitely find interest in one of the things that we covered here Adam I think it' be important that I drop uh chapters so that uh in this video they can get to what they would be most interested in even though the chapters really aggravate me because people are like put chapters in your videos because I do long form videos the problem is it's hard for the viewer to you know Skip around and go back because it complicates things I don't know if you have and also too like because we we we have the ability to introduce Nuance into the conversation if they jump to the a chapter at the end and we make a statement they might not have all the context leading up to it and it may sound like well that that's kind of a weird extreme point he just made yeah what I tell people is just hit the pause button or save for later and then you can pick it back up again when you're back on the elliptical or driving down the road or whatever um be careful if you're driving uh but I want to talk about because this directly impacts my business is the commercial real estate market because a lot of people think that this that that the pandemic was this phenomenon um you know that uh that took place where you know people work remotely and Office Buildings sit vacant you said something that is and most people don't realize this they made they being um well you could say special interest groups pushed agendas that were passed and became regulations that made employees extremely expensive for employers instead of it directly being to you know you're getting paid for what you can uh help the business profit it be it became very top sided with um costs of having employees know Insurance costs um it goes on and on I could list them and then people would just be upset because I'm saying like they don't work I mean it's just it goes on and on on Department of Labor and Licensing right all these different Regulatory Agencies and I'm not saying that we don't need them believe me I'm not but I'm what I'm saying is what you said was the cost of employees are high that in itself but I want to take it one step further because you said Wall Street has a lot of influence Wall Street and so does the the um the capital um or the administration but Wall Street is concerned about their shareholders MH so out of all of the cost of having employees they have a duty to their shareholders to deliver profits exactly yeah right so there what we've really built is a system that is going to force employers to use AI so we would be ridiculous if we didn't think this would progress you know and escalate to the point of job loss on a massive scale now there are people that are writing Ai and a lot of them are you know in the Silicon Valley companies I know some of them personally that are WR they have these AI companies and they say no no no you have it all wrong AI is going to build jobs it's going to enhance right let me tell you something when it gets to a point that a Wall Street company has the duty to their shareholder to eliminate the job the expensive employee and replace them with a robot they are going to do it AB absolutely th% over and over and over again so I think you know I think my friend that that is is going to be and and I think collectively Adam it brings us full circle because when we're talking about what's not working now with the US economy this is is going to amplify those problems because it's going to ultimately get back to affordability from a job loss uh standpoint and that's going to be devastating so I I absolutely agree um and look I I don't I don't think that there is sort of a a master plan to you know make people surfs of of the elite um I I I don't think that there's a a cabal of of of rich people that meet and plan this type of world domination that said I think just human interest and corporate interest playing out over time kind of gets you to the same ending and uh that's exactly what's going to happen uh with with corporations uh embracing any technology where they can shed you know humans um and and their way to deal with that in the interim is to try to just make it as easy as possible for people to get access to credit so that as they continue to struggle they can still they can still purchase on credit right but you you get to the Point called debt saturation right where the consumer just can't take on any more debt because if I take on this new debt I can't service this debt here right um or uh they get to the point where the creditors cut them off where they're just like I'm looking at your credit rating here and you're toxic I can't touch you right and and we're in danger of of of hitting that and I think that's that's going to be a part of going into this next recession is we're just going to start having more and more consumers just just kind of you know leave the buying pool because they they've they're just maxed out right they' did they've just literally played every trick and and they could and consumers are incredibly crafty I mean they'll they'll find all sorts of ways and that's why buy now pay lader just came into the the picture oh can't get a credit card but you still want to buy it okay well here yeah you want to eat you want to buy this week's groceries yeah well and sadly that's where we are right now is we're seeing more and more Essentials of living being placed on plastic which is why we're seeing record revolving credit card balances at consumer households and and very sadly and worrisomely those credit balances are now charging record high aprs right so it's it's the most debt we've ever had at the highest expensive cost yeah I saw one of my credit cards and and I'm fortunate that I get to pay them off every month I use them for points and at work I try and buy everything I mean look we've got more subscriptions that I don't even know how many subscriptions I have and my credit card uh company I just look at it it's like wow do we actually are these somebody else putting these on my card but anyway I was looking at the um at at the terms because I was just curious and it says if you fall delinquent or something like this if you miss your payment or you do this or you do that 30 34999 something crazy interest rate is what they can charge you for in dep definite period of time they don't ever have to like get off of that right so you you maybe you're at 14.99% as long as you're behaving and being a good actor but the minute you fall late on a payment they can take you up to 35% yep what so that's that and that's the landmine that's hidden in uh in buy now pay later where it looks like it's cheaper than credit card debt but if you if you miss a payment it just goes bananas in terms of what you get charged to your point like I'm sure you've got a good credit card rate the average credit card rate is like 24% yeah and if you can believe that so I'm sure those people have an even even more grotesque uh penalty rate that they get to let let me just mention this because people ask me this all the time they say Adam don't worry about credit cards because most people pay those off at the end of every month and I went and grabbed the data um it is only 35% of card holders uh pay off their monthly balance so that means 65% carry a balance uh and nearly half of those who uh have credit card debt say it would take them at least a year to pay it off they pay the minimum balance yeah I mean the minimum the minimum payment requirement right and and so basically no most people don't pay them off in fact more and more people are struggling under the the weight of this and of course as the rates go up and the price of everything goes up right uh it just gets that's more and more weight that's that's pulling down on this person so um so yeah I mean we we're we're uh if we haven't you know kind of beaten this horse to a bloody pulp here you know end of the day um we have a a economy that's powered by consumers we're doing a lot of things in the short and long term right whether it's higher cost of debt today whether it's risk of job loss in the medium term whether it's risk of your permanent job loss through AI you know in the long run we're doing a lot of things to injure uh the Golden Goose that powers the overall economy right um and so uh getting back to my original point about the whole lag effect here um sadly I think kind of the the beatings are going to continue until morale improves to go from that Old statement so I think the lag effect as it as it arrives and increasingly arrives at intensity is just going to make things worse and worse and worse for the average uh the average consumer um and that's the type of thing that I'm trying to get people to prepare for I'm not trying to sell Doom I'm not trying to tell people the world is ending tomorrow I'm just trying to tell you we've had uh a lot of Tailwinds at our backs for a long time I mean the the period from the great financial crisis until 2021 was like eternal Summer right I mean the the housing prices did nothing go up stock prices did nothing go up bond prices did nothing but go up um it was easy for all of us um you know yes there was the blip there in Co it wasn't a fun time but they they shov so much in the system that everybody's you know everybody who lost a job got hired back everybody who's 401K got damaged well that you know went off to the races after that uh and and now we're getting to a point I think where that just cannot continue and and as the lag effect really begins to arrive in force because it's taken so long to arrive I think we have to prepare for the potential of maybe several years ahead of of headwinds versus Tailwinds and that's kind of the main message I'm trying to get out to folks these days Todd which is all right well look if that's the case then you know what should I do right and you know congratulations to your viewers because the first thing that you should be doing is getting yourself educated about truly what's going on and where the risks lie and which risks you want to prioritize as the ones that you want to protect most against and then start creating an action plan for that so like I don't I don't necessarily tell people you should get out of the the stock market entirely right now I just think if you remain long well then you should probably have some hedges in place um if you're sitting on some stocks let's say you have owned Nvidia over the past bunch of years you're on phenomenal gains maybe take some of those gains off the table right not a bad time to maybe move some of your portfolio more into safe uh Securities that pay you a nice return like it's rarely been a better time in our living history to own treasuries right now in this type of environment um so there's an awful lot of things that you can do um uh you know if you're certainly if you work for a paycheck you should ask yourself how it risk is my job right and if you are if it's higher than you think it should be well then maybe you want to actually like start investing in you know upskilling a little bit you know make yourself a little bit more marketable a little bit more essential to your current employer or to a competing company in your field maybe don't wait until you get laid off to start knocking other doors maybe you want to start having lunches with other people in your industry right now and just be a known commodity so that if your company Falls in hard times you already have a foot in the door a relationship in the door somewhere else so there's a lot of things that you can be doing right now um I think the vast majority of people are just sleepwalking through this right they don't like to think about this stuff and and to a certain understandable degree they're just overwhelmed with life and they're just trying to get through their work day or manage their families as they should but what's coming may impact all of us and to to into it with no plan is that you know to fail to plan is to plan to fail right and I'm just trying like you to wake as many people up to the realities on the ground so that people can make more informed decisions to hopefully position themselves prudently for safety but but in certain cases maybe position yourself to profit a bit from some of these Trends as well yeah Adam I think it's all great uh advice and you you and I we're going to stay on close watch of everything that's going on and we'll continue our conversation and and uh man thanks so much for being on the channel guys all of Adams information is in the show notes Cruis on over to his thoughtful money great interviews we also will put the uh the link to the FED interview uh with uh Thomas Thomas hanik yeah his I I I I probably mispronounced his name five times during my interview with him until he he he told me it's he corrected you think of it like Han Solo yeah hanik yeah hanik all right well we will publish that also below and uh Adam thanks so much for your time ah Todd it's always a pleasure thanks so much for having me on your show thanks to your viewers for hanging in with us to this two-hour Mark here whoever's left um hopefully we didn't offend too many people with the third rails that we touched here but folks really hope that you just uh enjoy um hopefully kind of you know courageous but honest discussion of today's uh main issues and a huge thanks to you Todd for creating the uh the vehicle and the platform for that to be possible on yes likewise all right buddy okay Adam all right guys as you hold in to the very end I hope you're hearing me talk about this outro right now really I'd love to know your thoughts and comments if you could drop them below uh if you like the video you can let Adam and I know that you did by hitting that thumbs up it helps the algorithm helps to share uh this video with more people and also you could share it yourself to share button is below uh these are certainly topics you're not hearing in Headline News mainstream media um so the biggest compliment you can do for myself and Adam would be to share this video uh with your family and friends and finally guys if you haven't subscribed to our Channel consider doing so now hit that alert Bell you'll know every time we upload content just like this see you next time Sax realy Maryland broker number 6772 office number 443 318451 4 Equal Housing Opportunity

Channel: Sachs Realty

Views: 518,416

Keywords: us economy 2024, us economy news, us economy news today, us economy 2024 predictions, us economy crash, us economy collapse, federal reserve, us recession 2024, us recession news, us recession latest news, us recession news today, housing market, housing market 2024, housing market crash, housing market update, housing market 2024 forecast, housing market crash coming, mortgage rates, mortgage rates 2024, mortgage interest rates, us housing inventory, adam taggart

Id: 374ded8sFw4

Length: 111min 23sec (6683 seconds)

Published: Sat Apr 27 2024