In this Weekly Market Recap, Andrew Brill reflects on the interviews that took place on Wealthion over the past week in another Wealthion Weekly Market Recap! TIMESTAMPS: 00:00 – Introduction 00:09 – Jim Rickards Jim Rickards joined to discuss the latest in geopolitics and how they’ll play out economically. He also talked about the upcoming 2024 presidential election. Full Episode: https://youtu.be/0Okuu_ynEgk 12:56 – Steve Hanke Professor Steve Hanke joined us to discuss his view on the economy, interest rates and when he thinks a recession will hit. Plus, he shared his take on Warren Buffett’s investing style. Full Episode: https://youtu.be/m-SAz3krGmE 23:30 – Peter Boockvar On Speak Up with Anthony Scaramucci, Peter Boockvar explained his approach to fiscal and monetary policy. Boockvar also indicated the debt as being an unsustainable problem, and the baby boomer’s spending that could drive the spending off a cliff monetarily. Full Episode: https://youtu.be/UpM6yQrSTtw 34:35 – Phil Rosen Phil Rosen, Co-Founder and Editor of Opening Bell Daily joined to discuss the economy is his view as a reporter. He also touched on Roaring Kitty and what regulators can do about it. Full Episode: https://www.youtube.com/watch?v=2d4uNHo8bnI 41:32 – Marc LoPresti ( @MarketRebellion ) And finally, On Next Week on the Trading Floor, Marc LoPresti joined to share some interesting stock suggestions through the lens of the unusual options activity. Full Episode: https://youtu.be/oQlAta6o8KI 49:27- Closing Did you like that episode? Hit the like button and let us know what you thought in the comments below! ——————— At Wealthion, we show you how to protect and build your wealth by learning from the world’s top experts on finance and money. Each week we add new videos that provide you with access to the foremost specialists in investing, economics, the stock market, real estate and personal finance. We offer exceptional interviews and explainer videos that dive deep into the trends driving today’s markets, the economy, and your own net worth. We give you strategies for financial security, practical answers to questions like “how to grow my investments?”, and effective solutions for wealth building tailored to ‘regular’ investors just like you. There’s no doubt that it’s a very challenging time right now for the average investor. Above and beyond the recent economic impacts of COVID, the new era of record low interest rates, runaway US debt and US deficits, and trillions of dollars in monetary and fiscal stimulus stimulus has changed the rules of investing by dangerously distorting the Dow index, the S&P 500, and nearly all other asset prices. Can prices keep rising, or is there a painful reckoning ahead? Let us help you prepare your portfolio just in case the future brings one or more of the following: inflation, deflation, a bull market, a bear market, a market correction, a stock market crash, a real estate bubble, a real estate crash, an economic boom, a recession, a depression, or another global financial crisis. Put the wisdom from the money & markets experts we feature on Wealthion into action by scheduling a free consultation with Wealthion’s endorsed financial advisors, who will work with you to determine the right next steps for you to take in building your wealth. SCHEDULE YOUR FREE WEALTH CONSULTATION with Wealthion’s endorsed financial advisors here: https://www.wealthion.com/ Subscribe to our YouTube channel https://www.youtube.com/channel/UCKMeK-HGHfUFFArZ91rzv5A?sub_confirmation=1
Andrew Brill 0:00 Hello and welcome to wealthion's weekly market recap. I'm your host. Andrew brill, it's always fun to have Jim Rickards on wealthion to share his point of view this week. He spoke about the geopolitical situation and sanctions imposed by the United States and how this will play out economically. He also talked about the upcoming presidential election. James Connor 0:27 Let's move on now and look at Ukraine. Russia and Ukraine. War has been going on for two over two years now. It's hard to believe, but how do you think this situation is resolved? Jim Rickards 0:37 Well, it's resolving faster than I expected. Ukraine is, they've, they're about 500,000 dead Ukrainian soldiers. So I hope, hope Tony Blinken and Jake Sullivan and Victoria Nuland are happy with that, because they said they'd fight to the last Ukrainian and they're doing a pretty good job. About 500,000 dead. Ukraine's military is in a complete state of collapse. They are if they're fighting, they're losing. Many of them are surrendering. There are mutinies, there are desertions. When they retreat, it's not an orderly fighting retreat to a defensive position. It's more like running for your life, and the Russians are annihilating them with drones and, you know, heavy, heavily armored helicopters, bombers, other, other weapon systems, minefields, etc. They're now sending 70 year olds out there, sending 17 year olds out when I say they, I mean the Ukrainians, they've instituted a draft. I haven't been there, but I get a lot of pretty good intelligence. They say the streets of Kharkov, Kyiv, lebav are empty because, you know, men, younger men, say between 17 and 30 are just are hiding or leaving the countries or staying inside because they don't want to be, you know, dragooned off the streets and sent to the front lines to say, if you get to the front lines, your life expectancy is about three hours. That's how long it takes for the Russians to kill them. So they're getting beyond desperate. The wonder weapons have all failed. We sent them behind Mars. Precision got it utility as artillery, rather precision missiles it took the Russians almost no time to figure out how to jam the GPS so the missiles don't know where to go. They just go off course. We sent them Patriot anti missile batteries, a billion dollars a piece. I think we sent about nine. The only problem is that those missiles that those anti missile batteries cannot shoot down, hypersonic missiles. The Russians have hypersonic missiles, so they've been blowing them up one at a time. There aren't many left. They got challenger tanks from the UK, leopard tanks from Germany, Abrams tanks from the US, and also Bradley Fighting Vehicles from the US. They've all been left burning on the battlefield, completely ineffective. The armor is ineffective. So one by one, you know the Storm Shadow missiles. Most of them are shut down. They're pretty much out of them. They're out of 155 millimeter artillery shells. Because the Russian economy is making, like a million a month. They're on a complete war footing. Western economies, the US is struggling, struggling to open one factory that might make 30,000 a month, or, sorry, 300,000 a month, except it's not open, so they're still trying to do that, and our own supplies have been depleted. This is not just a question of Ukraine losing it's a question of Western arsenals being stripped. All these weapons are defective anyway, meaning they're obsolete and don't work against Russian offensive capabilities. But even allowing for that, we don't have anything left, so everything and economic sanctions. I mean, I teach a course in financial warfare at the US Army War College. I told my class over two years ago was April 2022 right after the war began. I said the sanctions will fail us. Sanctions on Russia will fail, but it will be worse than that. Not only will they fail, but they'll boomerang and hurt the US economy more than it hurts Russia. I just looked at the data. I don't have it all my fingertips, but by every significant metric, unemployment, inflation, GDP growth, debt to GDP ratio, manufacturing, PMIs, etc. Russia, the Russian economy is greatly outperforming the US economy, and in particular, the one that caught my eye was debt to GDP ratio. Russia is 17% privately, debt free. The US is, we mentioned, about 125% way, way past the point where the debt can create enough growth to even pay the debt. So So nice job. Janet Yellen, nice job. Wally ariyama, the Deputy Secretary of the Treasury. The sanctions have been. Complete failure. But they keep upping the ending. They keep the new thing is to steal $300 billion of US Treasury securities owned by Russia. That's a good way to sink the US government securities market. And it won't work. They might try to do it. They're going to try to do it at the reach consensus at the g7 summit meeting in Napoli, Italy, which is coming up on june 13, so just about two weeks away, not clear what they'll do. There's some talk of floating a $50 billion bond issue backed by the Russian assets. That's just a backdoor way of stealing them. It's a structured solution to stealing the assets. Some talk about just using the interest, not the principal. That's about six certainly, there's only about 3 billion a month, so it's been two years, so there's about 6 billion of interest pile up. It's just a smaller theft, $300 billion theft. They're all part of why the world is trying to de dollarize and get away from US Treasury securities. Now it does not mean if they do it and they're trying to do it and expect they will in some form. It does not mean the US Treasury market collapses the next day. I mean, you hear hysterical claims like that, that's not going to happen, but at the margin, it diminishes confidence in US Treasury securities. And if you felt that? And they do. You were say you're a finance minister, head of a central bank in a country that's running a trade surplus, and you're getting dollars, and you have to decide what to do with the money, no different than your clients, how do you allocate your assets? Well, all of a sudden, you know US Treasury securities don't look so good, because the US is in the business of stealing them. Do you like Japanese government bonds, German billions or Italian Government notes any better? I don't think so. If you lose confidence in the US Treasury securities market, why do those other vassal states look better when it comes to their government bond markets? So you pretty quickly end up buying gold. You don't have to be a gold bug. Just you as an asset allocator. If you can't trust the Western I just mentioned the four biggest government bond markets in world, Japan, Germany, Italy, in the US. If you can't trust them and you want something liquid, you're not going to buy real estate, not with your reserve position, you're going to buy gold. And that's part of what's driving the price of gold higher. So again, despite two years of failure, the US and NATO seem to want to double down with stealing the Russian assets. And the other thing Putin will do, or two other things Putin will do. And by the thing that policymakers don't understand about Putin, he doesn't bluff. He actually thinks hard about what he says, what he's going to say, gets a lot of advice. If he says something, you can put it in stone. It's going to do it. So he's already said, if the West steals these Russian assets, and as I mentioned, they're planning to do that maybe in as early as about two weeks, he's going to expropri all the Western assets in Russia. And guess what? There are more Western assets in Russia than there are US Treasury securities in the Russian reserve position well over 300 billion massive oil infrastructure from BP and Shell other oil companies. You can still buy Coca Cola in Moscow if you happen to be there, you know, take the take the Coca Cola business. A lot of US companies made a show we're getting out of Russia, you know, the start of the war. But they, they didn't really, and they might change some brands, close some outlets, but there are still massive investments. So food will just take all that, give it to Rosneft or Gazprom, or any of the other large Russian companies. But that's not the most dangerous thing he can do, which I expect he will 200 billion out of the 300 billion of Russian US Treasury. Russian owned US Treasury securities that they're planning to steal are in a place called Euroclear. Euroclear is the largest clearing settlement custody institution, Institute in Europe, comparable to our DTCC, not quite as large, but quite large, with over $40 trillion of assets in custody. They have offices around the world. They're based in Belgium, but they have offices in Hong Kong, Dubai, rep office in Beijing, office in Singapore, etc. All Putin has to do, and Hong Kong is an interesting case because it's it's under the thumb of the Chinese Communist but it still kind of walks and talks like a rule of law jurisdiction. They have lawyers and courts and all that good stuff. All Russia has to do is sue your clear in Hong Kong for wrongful conversion of its assets, get a judgment in its favor, run around the world, forcing the judgment by putting lean on other Euroclear assets that belong to other clients to settle the judgment, and you could throw a monkey wrench into the entire global monetary financial system that this is the kind that. So these, these idiots at the Treasury and the State Department and in NATO, they're playing with fire, and they don't, they don't even understand. I mean, what I just said was pretty clear, I'm gonna be a lawyer, so I understand this pretty well, but they wouldn't even thought about it. James Connor 10:13 It's an election year, and it looks like another Trump Biden rematch at this time, but anything can change. And the RNC will be held in Milwaukee this year, in July, and Trump is undergoing an onslaught of legal attacks. Do you think he survives these legal attacks, and will he become the next Republican nominee? Jim Rickards 10:32 Well, he will certainly be the nominee. He's already got more than enough delegates to do that the and I expect to win the election also is pretty clear in the polls. He's leading in national polls, which he's never done before. I mean, even when he won in 2016 he did not lead in national polls. National polls are kind of irrelevant, because we don't have national elections. We have state by state elections to elect electors to vote for the president. But if you boil that down to the seven battleground states. He's leading in seven out of seven. He's leading in the betting eyes. He's by every measure. Trump's ahead. And people say, well, Polls can change. That's true, but right now, you know, May, June is about when people lock in their choices. They're not very open to persuasion. So I do think it's a it's a pretty good forecast of what's going to happen. So I would expect Trump to win, having said that he might not make it to Milwaukee because he might be in jail. We're, you know, kind of awaiting the verdict and the Alvin Bragg farce, but I don't know what the verdict is going to be. I do. I've done a lot of litigation. I work with some of the finest litigators in the world. They all tell me the same thing, which is that nobody knows what a jury is going to do. Like that, you can have you can spend millions, and they do in jury advice and jury selection research, and when they're interviewing potential jurors, they they profile them, and they do background all, all in real time. I miss it's quite a science. But having said that every good litigator I've ever worked with, I've worked with quite a few, says You just never know what a jury is going to do. So I'm not going to forecast the outcome of the case. If he's acquitted, that's a big victory. Even a hung jury is a very meaningful victory. If he's convicted, he might be in jail by July. So now, of course, the case will be appealed. Will certainly be overturned on appeal, but that takes time so but just for viewers benefit, there is no prohibition. Well, there's no you can be a convicted felon behind bars and still be elected president. There's no disqualification or prohibition on a prisoner being elected president the United States, so I expect he will be. But it's just a question how far the Democrats want to take this unconstitutional, farcical lawfare campaign, but we'll find out. Andrew Brill 12:56 Professor Steve Hanke joined us to discuss his view on the economy, unemployment, interest rates and when he sees the recession coming. He also shared his take on Warren Buffett's investing style. So we're looking at a lag, and there's a report out now by the Cleveland fed that says 2% may not be achievable in 20 till 2027 Do you see that in your research? Do you see that happening? Steve Hanke 13:26 It'll, it'll happen by 2025 Andrew Brill 13:29 so we'll be down to a 2% and interest rates will, will interest rates come down first, or will... Steve Hanke 13:36 Interest rate follow inflation, so bond yields follow inflation. So like, like, the 10 year bond, I haven't looked at it today, but it's, it's more or less, like, four and a half percent, or just a tad, maybe above that, that 10 year yield will come down as inflation comes down. So, you know, it's as a place to park your money. That's a pretty good trade. Actually, your the yield is is pretty good. The yield will come down, so in a year, you'll have a nice little capital gain on the on the long position you have in a 10 year bond. Andrew Brill 14:18 I mean, unemployment is relatively low, but it's creeping up, and it seems like unemployment is going to continue to creep up, because there's all this talk of layoffs and stuff like that. The economy still doing okay. Is this a perfect storm where we are definitely heading into a recession? Steve Hanke 14:38 Yes, it's. It's really, it's really baked in the cake. Now you're talking about the labor market. Everybody says, Oh, the labor market's great. The labor market is great. Unemployment is low. But you did mention something that's important, Andrew, and that is it. It's come off the super low and risen. It's unemployment is going up. It's still very low, but, but it's increased by 5% by a half a half a percent, half half a percentage points, it's and when it does that, we always have a recession. So that's the threshold. If we, if we have a half a percent increase in the unemployment rate, we end up always fall. It's always followed by a recession. So it isn't, it isn't the levels that's that's so important that gives you one view of the thing. It's always in economics, you know, everything, as they say, is always determined at the margin. It's the Delta. It's what's changing, and unemployment is becoming more severe. Andrew Brill 15:57 So we have somewhat higher unemployment, and we have a recession on its way. How do we explain the stock market? Just continue the s, p, although down off its highs, and the NASDAQ, I, you know, you attribute that to Nvidia and AI, a little bit, is still reaching new highs. How do we I know that people look and say, Oh, the economy's great, the stock market's doing great. But that's not exactly the case, even though the stock market... Steve Hanke 16:26 I think we're in it. I'm not saying it's, I'm not calling it as an internet bubble, like we had, but we have. If you go back to 1881 and you look at Professor Robert Schiller at Yale's inflation adjusted PE ratios the way he calculates it, we've we've only had 5% of the time when the when the inflation adjusted PE ratios have been this higher above since 1881 so we're in pretty elevated territory. I'm not saying we're in a bubble. I'm just saying it's very the stock market is very pricey right now, so I think, I think there's quite a bit of exuberance, shall we say, in the in the market. And if you look at somebody like Warren Buffett, for example, what why is Buffett building such a huge pile of cash and not investing in the market? Now, not Buffett's rule, by the way, which I think it makes sense, when, when, when, when Buffett was looking at Apple to go big time. Berkshire has a huge position in Apple and, and at the time he went into that, they had a small position for Buffett that was about a billion dollars and, and, and his people came in and they said, Warren, you know this, we might be thinking about putting a little bit more money in there, here to Apple. What do you think? And and he said, Well, he said, let's I want to, I want to know this. He said, I want to buy something that's well priced with a PE ratio, 12 month forward earnings, 15 or less. So that's one thing, 15 or less. And then he said, I also want to know with an whether there's a 90% probability that earnings will go up in the next five years, over the next five years. And the third thing in Buffett's rule is the earnings. He wanted to know if the earnings, if there was a 50% chance, 50% chance that the earnings would go up by 7% per year for the next five years. So low PE below 15 earnings going up 90% chance for the next five years, and a 50% chance that those earnings would be going up at at least 7% per year. Now, if you apply that rule and look at stocks, you there, there aren't many out there. I don't think that the cut it. So, so that's that's a little bit consistent with, with, with this thing, with Bob Schiller's inflation adjusted PE observation that it's so, so I would characterize the market is, you know, a lot of exuberance, by the way you you mentioned, you know, or implied, The Magnificent Seven. The the breadth in the market is not that great, right? You got a few, you've got a few techies that are running the market and running, running the averages up. But if you. Really look at the breadth of the thing. You know, a lot of dogs and cats in there that aren't doing much of anything. Andrew Brill 20:07 So are we devaluing the dollar to the point where the dollar, you know, the dollar is what kind of rules the world right now? Are we devaluing the dollar to where, you know, bricks could possibly be to take over, or some other currency that the end perhaps? Steve Hanke 20:27 we're, okay, we see the de dollarization in the press all the time, almost daily, that you know the dollar is using value losing its place in the world. It's going to be overtaken by some bricks currency or cryptocurrencies or something like that. Well, who's pushing this idea? Number one, it is an idea that doesn't comport with what we see in current exchange rates, because if you look at the trade weighted value of the dollar, it's almost at its all time high. The dollar is very strong right now. You go to Europe, by the way, and you're gonna, you're gonna have a great summer, because $1 will go quite a ways. So. Andrew Brill 21:12 You just gave me an idea,. Steve Hanke 21:14 Yeah well exactly. So at any rate, it's being pushed a lot there. There are two avenues that this comes the crypto evangelicals push it because they're pushing crypto. And they're going to say that, you know, the next thing that's better than sliced bread is a crypto which which is not correct. The second group are basically the enemies of the United States. So you have a big propaganda machine, you know, the the BRICS crowd, badmouthing the dollar all the time while, if you look at it, if you look at any bricks, country there everybody residing in BRICS countries, they want to keep dollars under the mattress. Andrew Brill 22:03 Last thing I'll ask you about Professor Hanke is, is about gold. And it seems like there's countries around the world, China included, that is hoarding gold at this particular point in time. Any idea why? Steve Hanke 22:15 Well, it some, some of it is really I'm not saying there's nothing to the de dollarization thing, because the US is placing sanctions on people and countries and that they weaponized the US dollar to the extent that sanctions are tangled up With the US dollar, and that means what you you want to you do want to de dollarize? It gives you an incentive to de dollarize now. Now, what do you? What do you? How do you do that? Well, gold is a good way to do it, because gold is not issued by a sovereign. It's not a liability of anyone. It's not like, it's a liability of whoever the issuer is, or if a bank is, you know, makes it makes a loan. That is also, it's on, the balance sheet of the bank. That's not the case with the gold so go gold is attractive in that respect, if you, gold is is not issued by the United States. Andrew Brill 23:31 Peter Boockvar joined Anthony Scaramucci on speak up. Peter put on his fed hat and explained his approach to fiscal and monetary policy. He also indicated the debt as being an unsustainable problem, and the baby boomers spending, which could drive the country off a cliff monetarily. Anthony Scaramucci 23:51 mortgage applications are down 5.2% purchases are lower by 4.4 and this is the housing market, of course, refis are down 6.8% this is all numbers that have come out fresh. What say you about this? This is the lowest the index has been since 1995 are we worried? Peter Boockvar 24:12 Well, I think for the US economy as a whole, it's remarkably mixed and uneven. And narrowing it down to the question on housing, it's extraordinarily mixed as well. You have the pace of existing home sales, as you mentioned, that are near the lowest level in 30 years. But on the flip side, you have the new build market doing better, because we of course, need more inventory, and builders are able to provide that. But even within the new construction market, you have bigger builders that are taking market share, that are doing better than smaller builders. Bigger builders are able to provide incentives that are able to buy down your mortgage, whereas the local builder doesn't have that capability is dealing with the higher cost of capital and seeing a slowdown in their construction overall. Home sales are sort of middle of the road, and of course, we know affordability, mortgage rates being high, or all the major impactful influences here on the housing market right now. Anthony Scaramucci 25:12 Okay, so I'm putting you in charge of everything. Okay, you're very smart, you're a rational guy, you're a moderate guy, you're a data guy, you're in now charge of everything. Here's the economic dashboard of the US. What do you do from a fiscal and monetary perspective, to increase people's living standards and help them? Right now, at this period of time. Peter Boockvar 25:36 On the fiscal side, the government has to reduce the rate of spending increases to something like two to 3% not the 567, percent. And because we'll never actually see a reduction in spending, it's a the question of moderating the rate of increase and get something more to a trajectory that we had for fall before all this covid spend and two to 3% of the reason why I threw out those numbers is because pre covid inflation was around even one to 2% so I'm giving it some extra room, but slowing down the pace of that increase would go a long way in resetting the fiscal side in terms of The budget deficit and debts and deficits. Now that will have a short term impact on economic growth, because the bigger deficits flow through the economy, but it is a better long term strategy in terms of maybe moderating the pressure points on inflation that's being fed through Excessive government spending. Now with respect to monetary policy. You go back historically, monetary policy and interest rates are about where interest rates were before the great financial crisis. The problem was the 15 years of artificially low interest rates that make the transition to more normal, normal ones, a very difficult one to make in for example, that we are as we well know that 3% mortgage that is now repricing at eight, nine and even to double digit type interest rates, right? That is something that takes years for us to transition to, even though current interest rates, bigger picture, longer term is a good thing to have positive real interest rates, interest rates that are about two to 300 basis points above the rate of inflation. Now what I would do I was in Jay Powell See, right now he's dealing with the fear of having inflation re accelerate and but at the same time seeing that there's some sort of air pockets being found in the economy, particular labor market where there's a slowing demand for workers, there's an uptick in the unemployment rate, and how does he balance that? And that's a difficult job for him. I would be cutting rates maybe once or twice this year, taking a step back, see what happens. But the days are going back to zero or over. Anthony Scaramucci 27:59 Is it possible, given the two presidential candidates and giving what you know about the Fed, will they slow down spending? I mean, this is a staggering statistic, but I'll give it to you, George Washington to George Walker, Bush, $7 trillion uh, Barack Obama, Donald J Trump, Joe Biden, $28 trillion so, I mean, we've gone crazy now with the deficit spending. And I guess the question is, are we ever going to rein that in, and could the Fed ever get back to that 2% designated inflation number? Peter Boockvar 28:35 Well, the problem, as we know, is we have the non discretionary part of spending, Medicare, Medicaid, Social Security, that is on autopilot. The problem now is we're adding a fourth line item to that autopilot nature, and that's interest expense. And now interest expense, on an annualized basis, at current levels of interest rates are around a trillion dollars are exceeding the spending on defense, and that is, unfortunately a line item that only gets worse as the years go on from here, assuming we don't go back to zero interest rates, which I think is an impossibility. So and you have a budget deficit as a percent of GDP at 6% which historically speaking, is what you usually see at the trough of a recession, like you did in the early 80s. Recession you saw in the 1990 91 recession. You saw in the 2000 2001 recession, we got to about 10% during the great financial crisis. And I'll put away covid Because, you know, that was an abnormality. So you can assume if the economy softens from here, if the unemployment rate goes up from here, and tax receipts shrink, that budget deficit as a percent of GDP, potentially could approach 10% and it's reining that in. Unfortunately, we know congress and Washington will only respond in a crisis. How. How I would define an urgency moment in Washington to address this is if the bond market revolts again from here, defined as the 10 year yield, goes to five and a half to 6% in a very short period of time. Until that happens, we won't get any change in policy in Washington, whether it's Trump or Biden, it's only if the bond market forces them to make the change, because now interest expense is a major problem for that city. Anthony Scaramucci 30:32 I have a theory, and I'm going to test it on you, and I want you to react to it. I have a theory that this generation of leaders is going to run us into a debt crisis. It's just looking like an absolute slow motion train wreck. They'll add, whether it's Joe Biden or it's Donald Trump, they're going to add four to $6 trillion to the deficit if rates don't go down. It sounds like they're sticky with a slight downward trend because of productivity and AI and things like that, but we'll be staring down the barrel of one and a half to $2 trillion worth of interest payments. And so I'm right about this. What happens to the United States and what happens to the economy. What happens to the average citizen United States if a president in 2020 let's say 2029 2032 has to say, Geez, I'm really sorry. We just ran the country off the cliff. We have $45 trillion of spending now we're just going to make money from our printing press to pay the interest on the money, and your living standards are heading south as a result of this. What happens and how could we course correct it? Peter Boockvar 31:50 Well, I'll lay out what that would look like, you know, in terms of the market. Anthony Scaramucci 31:54 Do you think that's a possibility, sir, let me say that Peter Boockvar 31:57 100% possibility. Anthony Scaramucci 31:58 All right, so then what happens? Peter Boockvar 32:01 For as long as you know, for 40 years, people have been talking about debts and deficits, and it never has mattered. I do believe that now it does matter. The question is, okay, it matters for what? Well, I do believe that it matters now for interest rates. It matters now for the reserve status of the US dollar, the value of the US dollar, the purchasing power of the US dollar. Now I do believe the reserve status of the US dollar will maintain itself, but it's getting chipped away. You look at over the last couple of years, you have Russia and Saudi Arabia dealing with China in non dollars and dealing with their own currencies. China buying soybeans from Brazil in renminbi, not in dollars, because they don't want to hold as many dollars. They see the the debt and deficit trajectory of the US. So what the crisis situation would look like is, back to my earlier point, is you would see a revolt in the bond market. You would see the 10 year yield go to five, back to 5% back to go to five and a half to six in sort of an uncontrollable way, because the bond market has a failed auction, because they're getting overwhelmed with the amount of supply coming from the US Treasury to finance these exploding debts and deficits. Then all of a sudden, the Fed has to step in. They try to lower short term interest rates, but that backfires, because the market starts to get worried about higher inflation. Long rates continue to go higher than the Fed reverts to QE to do what the Bank of England did with stemming the spike in gilt yields last year. And then all of a sudden, in response, the dollar tanks. And then we start importing more inflation, because oil goes to $100 and other commodities go higher. This is what the crisis in terms of the market and economic reality would be to that then, of course, that puts that affects the stock market. The stock market falls. The wealth effect then flows through the higher income spending, so the hiring income consumer that's really keeping the economy of flu, they pull back their spending, higher inflation, negatively, further impacts the lower income consumer. We're in a deep recession. That's the bad scenario. Then your question is, how does the government then respond to that? And that's when they'll have to make the very hard spending decisions which has been done in the past, Canada had a major budget, debt and deficit problem in the 90s, and they slowed the pace of spending. So it can be done, but we know Washington won't do it until these bad things start to happen. Anthony Scaramucci 34:34 That's a sad, sad thing. You know? Unfortunately Peter Boockvar 34:36 Yeah Andrew Brill 34:37 Phil Rosen, co founder and editor of opening bell, Daly joined Wealthion to discuss the economy through the eyes of a seasoned reporter. He also touched on roaring kitty and how he is affecting stocks and what regulators can do about it. I know through your financial reporting, and you're not an economist, so we're not going to you. Frame it that way, but through your financial reporting, what is your view of the economy right now? What are people telling you about the economy right now? Peter Boockvar 35:10 Yeah, it really depends who I'm talking to. So if I'm talking to economists, most economists say that the economy, US economy looks very resilient, and things are actually on track for a soft landing. And that's, you know, that's sort of been the view for the past six months or so, and the interviews I do and the writing I'm doing, but if you look at surveys of everyday Americans and those who are not economists, they have a much bleaker view of how things are going. And that's something I've been writing about a lot, actually, this sort of discrepancy between how economists are reading and seeing the data versus how everyday Americans are actually feeling. And you know, a big point of contention that I'm trying to clarify for readers right now is inflation. You know, there's all this chatter of inflation being down from its 9% peak a couple years ago to about three and a half percent now. And you know, you hear policy makers talking about inflation is cooling, but then if you look at the cumulative price gains in the last three years, they're almost 20% and that's something that I think people are feeling in their wallets, and it doesn't quite mesh with the news when it says inflation is cooling now it's at, you know, dipping towards 3% people don't feel that because they see prices being 20% higher than three years ago, cumulatively. And that's, that's a big that's a big topic these days, that sort of difference there. Andrew Brill 36:48 So you had an interesting article out about meme stocks and roaring kitty and how, how can one guy manipulate a stock where he's making, you know, seasoned investors and funds lose billions of dollars. It boggles my mind. Peter Boockvar 37:11 Yeah and, you know, I think it's so interesting, even you, you use the word manipulate, and it's very hard to say, and hearts, of course, who's doing what here? And this was, you know, I think the trading platform he's on, e trade is weighing whether to kick him off. I think that's very interesting. And I think there are some regulators looking into his social media posts and the timing of his trades. But if you consider what he's posting. They're just photos and kind of random stuff, the, you know, memes. And he posted, you know, if it's his account still run by him, the screenshot of a very large position in GameStop, and that sent the stock higher, or the stock went higher after that was posted. It would be so unusual and pretty unprecedented to call that market manipulation, because he's not actually telling anyone to do anything. It's sort of just this unspoken thing that, you know, you got a bunch of retail investors rallying behind him, like three years ago, the same thing happened when sort of Gamestop became the first meme stock. And, yeah, I do think it's a bit, I don't think it's that fair to call it market manipulation, because really just, you know, maybe he's just some guy sharing his positions, and he's not telling anyone anything. He's not ordering or commanding, and I'm not sure how solid a case the regulators would have if they tried to go after him for this, but, you know, part of it, I think it appears he's just crushing it as a trader. And, you know, maybe it's tough for regulators to stomach that, because he's been, you know, relatively, not even relatively, just extremely successful over the last couple years. Andrew Brill 39:02 As far as I know, he's just a single investor. He doesn't have a problem. He doesn't he's not a financial analyst or anything like that. But when it, when it it first started a few weeks back, and he posted what I guess looked like someone sitting forward in their seat with a game controller. I had no idea what this meant. And a viewer said, Well, that's that's him saying I'm in and I was like, okay, you know, if that's what he's saying, and that's the meme he's putting out, you can read that. I looked at it, said, I don't know what this means. I'll be honest. I don't own any GameStop. Never have. But there's people that are making good money with that stock, and there's also people shorting it that are losing a lot of money. So I just I wonder, how is it that this caught on and people are now back as I go, Keith Gill is back Roaring Kitty's back. Let's follow him and see where this goes. Peter Boockvar 39:58 Well, I think. He it's very unusual to make such a large bet that's so offsides and then be correct, but you really only need to do that once to become sort of a legendary trader. And he did that three years ago, and it it was such a huge contrarian bet at the time, and he made so much money off of it. And really, you know, there was the big David Goliath narrative around all of this too. And it's, yeah, it's very unusual when you see a sort of this legendary trader, or at least in the eyes of retail investors, and then he goes dark for three years, and it's like when he comes back. That can only mean, okay, it's game on again. You know, at least in the eyes of some retail traders and this, yeah, the chatter on Twitter and on Reddit is extraordinary, like the the enthusiasm and some of the positions that people are hosting that they are taking in GameStop. And, yeah, I think if those Rowan kitty, if he holds his options until they expire, he'll be something like the fourth largest shareholder of GameStop. And he's just, you know, he really is just a guy. And you know, he's not an institution, but he's right up there with all the institutions as far as this one position. And that's, yeah, there's been nothing like it, and it's very hard to conceptualize, actually. Andrew Brill 41:34 And Marc LoPresti joined next week on the trading floor and had some interesting stock suggestions for the week through the lens of unusual options activity. Let's start here and talk to me about what's going on in the markets presently, as you see it. Marc LoPresti 41:53 Well, it was certainly an interesting week. We got that PCE print this morning, most important piece of economic data for the week. Of course, the Fed's preferred inflation Gage, that number coming in exactly as the street was expecting. Of course, it's still going up right spot. 20 was actually the print, but that's what the street was looking for. Directionally, still not what we want, but we're still living in that bizarro, bad news good news world, where as long as the news isn't worse than we were expecting, the market seems to react fairly well. We are seeing a little bit of a sell off today. The s, p, looking like it's going to actually be in the red for the first time here in a six week block. Definitely some profit taking and some of the bigger names like Nvidia. One of the things that just really shocked me this week Andrew was the strength of consumer in the discretionary space. In certain niche areas, we saw footwear brands in particular, like Birkenstock, Foot Locker and others we had on O N on holdings the week before, people are really splurging on their kicks. We saw great numbers out of Best Buy this week as well. So still, a lot of strength in the consumer. I don't know exactly where they're getting the money from. I know that with employment being where it is, and wages having finally caught up with inflation sometime back, that people are feeling a little bit wealthier. But of course, we're also looking at credit card balances and charge offs and things of that nature, and reserves for delinquencies. It's a really interesting mixed picture, and I think that's part of why you're getting a lot of this mixed signals, or blurred lines, as I like to jokingly refer to it when we hear some commentary out of, for example, permahawk, Neel Kashkari this week, who definitely gave some indication that the numbers are not what this Fed is looking for to get anywhere near their 2% target. So a mixed bag for sure, and I think we're going to continue to see some choppiness into next week. Andrew Brill 44:02 Let's get into our our previous picks, which Justin from market rebellion did for us. And he picked, and he was very, very bullish on Nvidia and Mark. Why not? Marc LoPresti 44:15 Yeah. Listen, we're talking, of course, about Justin Nugent, who's a rock star member of our team. When he was on last week, I was traveling. Pete was traveling. John was traveling. That that does often happen. And Justin, I think his top bull pick, when you asked him what was going to go up towards the sky, and the week that now pursued us in video, I think when he came on, the stock was around 950 obviously 1157 the handle on that. So that was another great call. He also, I think, his bull, his bear pick, if I remember correctly, Andrew was, was lcid, lucid motors that also went down and recovered a little bit, but, but that was also a good trade if you find. Solid from his recommendation. So, you know, always looked at power of unusual activity, and we had unusual we had some pretty significant this past week, pretty significant bearish put selling activity in Dell. Of course, that stock getting absolutely crushed today. We had unusual bearish activity that we reported to our members in CRM. That's, of course, Salesforce, that company, also getting beat up, not necessarily on the print, but on the guidance. And this is one of the things that we're spending a lot of time with our subscribers and our students in our educational courses around that. You know, it's getting harder and harder to play the earnings, because companies might meet or even mildly beat the streets expectations, but you're seeing a lot of the of the trading, a lot of the real momentum in these stocks, either to the upside or the downside, premised on the basis of guidance, and that's a little bit harder to predict, in fact, oftentimes, than the earnings print itself. And this week was no exception to that rule. Andrew Brill 46:07 Let's look now ahead now at next week. And you know, we were talking about Nvidia, and in order to make AI work, Mark, we need the infrastructure, we need the power, and one of your your stocks addresses that issue. Marc LoPresti 46:21 Yeah, listen. I mean, there is no doubt that the continued explosion of data centers and demand driven not only by AI, but as we continue to have data used and permeate just about every part of our lives. Our cars are connected, our refrigerators are connected. Our watches have become smart. Our TVs are smart. TVs are connected. All of that generates data that needs to be stored, that needs to be processed, that needs to be, in many cases, analyzed, so insights can be derived. AI is only a more fuel on that fire, and it's important that we when we think about investing in the growth of AI and the growth of data, you don't have to play the big chip names like Nvidia look a little bit further down that supply chain at the data centers, at companies that operate those data centers and companies that provide energy and power For those data centers. Vistra, as you point out, VST is the symbol. It's got about a $36 billion market cap, and these guys continue to do well on that insatiable demand for energy by that growth of artificial intelligence. You know, we've got an aging grid. We don't have enough to keep up. Vistra is an IPP, an independent power producer. It's one of the largest competitive power generators in the US. They've got roughly 41 gigawatts of capacity. They've got both from gas and nuclear, which is actually the second largest producer in the country, independent producer in the country, of nuclear energy, by the way, that also teases out, and I'll mention it here our fantastic future segment that we did on the rebel edge yesterday, where we talked about uranium. There's been this proliferation of the development of new nuclear reactors. Not sure if you've heard about this, but the micro reactor space, these smaller reactors that are able to harness the power of nuclear on a scale, in a format that was previously not possible. There are 62 new developments as of the end of the first quarter of this year, of new power plants, nuclear power plants. Those are all going to need uranium, so that's something that we are also keeping a cautious eye on but there's lot the moral the story is plenty of money to be made in the continued growth of AI. You don't just have to chase Nvidia, even at particularly at these prices, even though I still like it, and I'm an NVIDIA bowl, even though it's expensive. Andrew Brill 48:56 So that if you have, uh, you know, a little bit extra cast, vistra Corp VST would be your pick, according to Mark, so that they supply the power, so that NVIDIA could get your work done. So basically, that's where we're going with that. So let's recap it. Mark, your winner of the Week is vistra Corp VST, and that's they, they supply the energy so the AI can work. Dell computer is the in the penalty box this week, and that might take a little hit and DraftKings with the unusual options activity. So those are your three picks for the week. Thank you for watching this week's recap, and don't forget to head over to wealthion.com for a free, no obligation, portfolio review with one of our registered investment advisors. You can also follow us on social media for the latest news and information to help you invest wisely. If you haven't done so already, please make sure to like and subscribe to the channel. Don't forget to turn on notifications so that you never miss a video until next time. Stay informed. Be empowered and may your investments flourish. And if you like this content and are looking for more ways to keep. On your investments. Watch this video next you.
