Welcome to another Finance University conversation between Chris and finance and portfolio expert Paul Kiker.
We’re in the middle of a financial sea where all the boats – stocks, bitcoins, commodities – are floating comfortably on a sea of easy financial conditions.
But word on the street is this sea of cash could be about to dry up. The end of March is the whisper date. Now, wouldn’t that put a damper on things?
You might be wondering – how could this be? After all, the Federal Reserve and the government have been pumping out money faster than a counterfeit operation in a crime movie. But here’s the twist – all that money, while it did prop up the banking system for a while, is slowly getting used up. And if the whispers are true, by the end of March, we might be scraping the bottom of the barrel. So, is the market truly as invincible as it seems, or are we just one drain away from a whirlpool? Let’s navigate these waters together and find out.
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As an old person retired on social security, I also criticize the AARP because they just want to demand that retires will always get money the government doesn’t have.
I know people are no longer living longer, but ignoring the new spate of early deaths, I don’t think people have any right to retire at 62 and then spend 30 years on the dole at the expense of younger generations. It is true that the elderly on average get more back than they’ve paid in if they survive to the average age.
Also, SS is very regressive. I don’t hear anybody talking about removing the cap on amt of income subject to SS tax.
We need to raise the early and full retirement ages.
What is most likely to happen is that retirees in the 50-95th income percentiles will discover that both their SS and IRA savings are taxed away to keep the poor from starving without impacting the top 1%. I don’t think this is just those under 45 that will be impacted. I think those of us already retired will also find that the 1% find ways to extract the last pound of flesh from any non-elite baby boomers that are still solvent.
AARP should be advocating for the 1% to begin paying their fair share of these unfunded liabilities. They should not be trying to protect retirees at the expense of young, middle income families. That’s just rearranging the deck chairs on the titanic.
They should also be pushing medicare to stop supporting expensive, largely non-effective treatments that make lots of money for the health/insurance/pharma cartels. Medicare needs to be prevented from refusing to allow “unapproved” treatments. I’d say if a treatment is less expensive (e.g. IVM) AND the patient improves, medicare should be required to pay the costs in lieu of trying to force more expensive, less effective treatments.
1 - Danielle DiMartino Booth has been all over the internet also sounding the alarm about March. She sees major layoffs coming by then. Here’s one, half hour, example, recorded on January 22: https://www.youtube.com/watch?v=ovXaIFPy-ks
2 - Back in my youth, I lived in group housing (late-stage, urban communes), and visited many similar communities across the US. I learned that how people treat their kitchen and kitchen interactions tells the story of the human relationships in that house/community. Later, when I visited a fellow pastor at his home, I saw kitchen cabinet doors off the cabinets and stacked hither and yon, leaning on counters and walls. When I learned they were being refinished but had been in their current state for over a year, I understood the couple was in trouble. Yes, they divorced eventually, after my pastor friend also abandoned ministry for a social work position in a non-profit. The US has become shabby because we have no center any longer; we are a family in deep trouble to the level of crisis, and divorce may not be avoidable, especially as we’re already at the point of domestic abuse. It’s amazing how common it is that money lies at the root of divorce.
3 - The inability to conservatively prepare for inflation’s effects on retirement income struck me almost 40 years ago, and was reinforced for me when I briefly owned a State Farm Insurance business. It’s the reason I put no faith in traditional finance’s ““answer”” to the retirement conundrum. It’s why I took over my retirement account and eventually went all-in on bitcoin. Risky? Yes. And it’s paid off. But I am also insured against its failure by now having land and house clear. And a plan for how to live even if we lose this foundation.
4 - Regarding taking advantage of current “euphoria pricing” to harvest some gains to help protect against coming need: where does someone who harvests park their gains? In other posts Chris has said Treasury Direct. Problem is, that’s easy to lose in the Great Taking. And even if it isn’t, Treasuries are paying something like 5% in an economy where the real inflation rate is at least 7% (being conservatively off-the-cuff), so the strategy is still at least 2% loss per year. Again, conservatively. Seems to us the best use of such gains is land-house out of debt, deep pantry, and means to grow food. And, I continually argue, at least 1% allocated to btc just in case it works as intended as an inflation/currency collapse hedge over the long term.
5 - It struck us today that Paul Kiker looks (and sounds) a lot like a younger (and more handsome) Billy Bob Thornton.
Harry Dent Jr. was on Coast to Coast AM last night.
He thinks we are in the biggest everything bubble of all time in stocks, bonds and real estate, much bigger than 1929. And that it is an extension of the 2008 problems which were never addressed properly.
He thinks everything is going to crash this year and next, but that it has to because the cycle of crashes and recessions is as needed and natural as day and night.
So basically he says sell everything now, including your house if you can, and rent. Put it in short term treasury bills and in a year or two you can buy your house back at 50% of what you sold it for. Same for stocks.
He did not mention PMs as far as I could her thru the fading ionosphere.
I assume that’s if a person is in a large mortgage with variable interest rates?
I’d say: if possible pay it off. Better to own where one lives than rent. Rent prices will go up, perhaps dramatically. Already, folks are finding themselves priced out of rental housing. It doesn’t get better.
If I had to sell my house, I’d rent as far below my means as I could manage without putting myself in physical danger.
I think it’s a significant assumption that we’re going to be able to buy assets back at all, let alone at half price. I don’t think the next 20 years looks like the last 20 years. Dent might be suffering from recency bias, here.
Yes I did have trouble imagining such good times might come again to buy things back, but that is his thing, markets have to pop/go down before they come back up again. The boom bust cycle is needed. He did criticize giving money to other countries, jobs moving abroad, but the cycle seemed more important.
He also said China’s population will drop to 800 million in sixty years because of the previous 1 child policy.
Oh yes, and this top/crash is world-wide.
Edit: He had an inspirational explanation for the importance of the cycles: it clears out the bloat and non productive parts plus the hard times encourages new thinking and innovative solutions.
The bubbles are bubbling along and it concerns me, not so much because - hey - bubble eventually burst, but because I am detecting the same mind-control techniques that were obvious during Covid being used on ““market”” participants now.
Simple repetition of complete BS somehow converts that BS into truth for many people.
So, I see many people falling for the same mind tricks today as fell for the BS in 2007 about housing and in 1999 for the internet. Today, that euphoria is centered on AI.
Previously it used to take a full generation between massive bubbles for people to forget. Now? The forgetting is practically instantaneous. We move from one Trump hoax to another seamlessly, as we move from one financial bubble to another seamlessly.
How to account for this? I remain at something of a loss, but “evil” gets me to a workable answer the quickest.
Dark forces are in play.
Regardless, knowing this provides something of a superpower…never forget to take your profits while you can and spend those fiat dollars on things with lasting value.
Dent is a reliable fellow…he reliably tells us what should happen, which is a deflationary crash. But what will happen is another matter.
I can say, with 99% certainty, that what will happen is the Fed, et al., will print and then print more to avoid a deflationary outcome.
You see, deflation harms the holders of the debt instruments that go bust. That would be the big banks who the Fed is sworn to protect at any cost.
Inflation harms little people mostly, being a truly regressive tax, and those little folks don’t attend the same parties as the Fed officials and so they have no power and exert no influence.
“You show me the incentive, and I’ll show you the outcome.”
Harry Dent makes a lot of sense . Unfortunately, he’s been beating the same drum for years , each time predicting in 6 months ,shtf …
It’s getting rather tedious waiting for things to fall apart .
Is it hyper inflation, deflation ? I just don’t know .
For me , it’s about diversifying. Loans paid off. Farm land , cash . Btc, PM ,garden , fruit trees planted .
We’re about to go on a trip , and because I don’t know the destination, I’m packing my flip flops , and my snow boots.
My swim suit , and my coveralls ,
H
I’d like to see a chart of median home price divided by average hourly income. That ratio will show how many life-years the little people have to work to pay for the average house.
Maybe when I get my database back online I’ll produce this chart.
Simple math: 2006 = 12,354 hours. 2024 = 12,089 hours. 2000 work-hours per year = 6 years. That’s not counting interest expense. If 25% of income is available to pay for housing, that’s 24 years. Maybe that’s why we get 30 year mortgages.
Harry Dent and Peter Schiff are great examples of Michael Yon’s “your paradigm is wrong” They are both spot on with their demographic and macroeconomic analysis. But their paradigm is that the fraudnancial system is still a “market”. Buying stocks regardless of price with fresh inflation, printing trillions at every small hiccup, rigging the debt market everything is priced against, changing the rules daily, broken yardsticks and outright lies mean no price discovery, no pricing of risk therefore NOT a market. Plus Dent doesn’t consider the now 3.5+ million legal immigrants and criminal aliens pouring over the border a year.
Both are excellent examples of having very good insight into one key aspect of a complex, multi-factor framework and basically ignoring the other factors.
Dent’s demographic work is worth reading but I would not take his investment advice. He’s notorious for his poor track record. He gets the deflationary forces but doesn’t appreciate the competing inflationary forces.
Schiff called the housing bust and is right on gold in the long run. A friend lost quite a bit of money investing with Schiff as gold price went down and stayed over the post2011 gold bear market.
(Also, I always applaud the efforts to avoid the big round numbers, in this case it was important to someone that it not close down -20% so we got 19.99% instead.)
