I start today’s show with a rant on my experience building a home… from paying the bills before my family even moved in… to workers smoking in the house… to a shower leaking through the ceiling… and getting ripped off on allowances.
Housing demand remains strong—for now. I explain why I expect the outlook for homebuilders to turn ugly over the next 12 months.
By the time you listen to this episode, the latest Consumer Price Index (CPI) data will be out. I break down why the Fed can’t lower interest rates until it gets inflation under control… and why a rate cut would be the biggest mistake the Fed could make.
Tomorrow on WSU Premium, Daniel and I will dig through the inflation data and share our latest Dollar Stock Club pick—a company that will benefit from interest rates remaining higher for longer.
- My homebuilding nightmare continues [0:30]
- Housing demand is strong—for now [5:00]
- The next 12 months will be tough for homebuilders [12:10]
- What I expect from today’s CPI data [18:40]
- Why the Fed must get inflation under control [24:25]
- Why cutting rates would be a massive mistake [34:30]
- Don’t miss an episode of WSU Premium [35:20]
Wall Street Unplugged | 1035
The biggest mistake the Fed can make right now
This transcript was automatically generated.
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.
Frank Curzio: How’s it going out there? It’s May 10.
I’m Frank Curzio.
This is the Wall Street Unplugged podcast where I break down the headlines and tell you what’s really moving these markets.
You know all home builders.
are pretty effed up I mean the more I tell my story about my house more emails I get.
with similar horror stories In fact, I haven’t received one email telling me that they’re building was awesome.
It was great.
It was the best experience ever.
I probably got about 30 different emails.
Even people in the industry laughing going.
I know what you’re going through buddy.
But for me at closed my house in December many of you know.
my construction loan turned over into a traditional mortgage So it’s my first house.
And I had no idea how this works.
Just got thrown into the fire.
To the construction company is paying everything right? So it’s under construction or they pay for everything while it’s under that loan.
It’s not it’s no interest, right? They just pay and it’s it’s a lot lower than a regular mortgage, but it’s the construction loan.
So they’re paying for electricity.
They’re paying for water all the bills whilst under the construction loan.
So once I closed and switched over.
They still need to do more work on the house in order for me to move there.
I didn’t understand this part.
Because it wasn’t a ton of work right was a lot of work just like little things like install the propane tank.
So I have hot water and cook food so I could eat and I could live.
And install fans and lights.
So I could see at night.
Had to clean the place since it was full of dust.
footprints on the hardwood floors had installed fence around the property so my dogs don’t run into my brand new neighbors’ backyard and take it in their yard.
It’s not really a good first impression.
That install my TVs and internet still.
That’s why I know what’s going on with the world.
It’s a little bit important for the job that I do know what’s going on little things like that.
They still need us to do when I closed they promised.
Hey, we’re gonna do all the stuff right away.
So now it took us another three months to move in.
So since I closed in December.
Now the loan switched over and I’m paying for all those bills even though not living there.
So I’m paying for those three months, but basically construction workers to live in my house.
So now that it’s a mortgage which again I learned the hard way, but once a construction on switch is over now, the interest comes in and the payment increases by 3x now, that’s your mortgage.
So now I’m paying a lot of money not living there and even with check on the house at night to say.
Hey, let’s you know me my wife about 50 minutes away.
So let’s go out there see what they did with, you know, we’re glad to probably every three days or whatever.
I should have been there every day.
So I definitely recommend for you guys building house be there every day because I tried to get a cut corn as much they can.
Especially going forward since the market is slowing a little bit which get to in a minute.
But with you check in the house tonight all lights in the house are on then I’m paying for.
Irrigation water going on even in places where there’s no gra**.
I’m like, oh I’m like hey, you know No problem here.
Then when I finally move in in mid April.
Again, all this is promised to be done, which it wasn’t.
We still have vendors coming in and out of my house daily like they lived there with us.
I mean just coming in and out in the morning.
As our kids are getting ready for school.
And funny story, you know one guy walked in.
One guy walked in the other day.
My father just sitting on the couch.
I didn’t even see him.
I think it was like 11 o’clock.
I mean I was gonna kill the guy no idea turned out was the plumber.
He’s used to walk it in the house all the time and doing everything hasn’t been there for a few weeks.
Of course supposed to come two days before that and outside.
I show up as a blue like that’s normal again.
Welcome to Florida.
That’s that’s very normal here.
I’ll see it three o’clock.
On Wednesday and no call no nothing and they’ll show up like Friday and knock on that door like.
They’re expected to be there.
Hey, how’s it going? How you doing? I’ve learned to just just close the door right in the face.
If they don’t get the hit.
But even better two weeks after we moved in right so now we’re in we’re like, okay moving in.
They gotta do a couple more things whatever.
So now we finally moved in My daughters take a shower upstairs bathroom and the pan happened to be sliced.
Like it’s almost impossible to do unless you’re a complete freaking idiot, right? This is a brand new house brand new house is a Pan underneath the shower and it was sliced completely open, right? You can’t see it because at the tiles over it so Susie goes down to drain it leaked.
It leaked all the way downstairs through my ceiling started pouring water onto my island in the kitchen onto my hardwood floors.
They had a demo the entire shower again what we’re living there towels for everything.
They still fix it right now.
They’re coming tomorrow to tile it finally.
tomorrow but the home building industry, I mean There’s a reason why these a**holes are trying 52 week guys.
Hey when demand is strong they bang you out they can do whatever they want.
We’ve heard this even from people who are vendors and they say look it’s a market now where they’re dying for workers at least, you know.
You’ve seen it die down a lot more attend the second.
Give me last year and two years.
Hey, just when interest rates were lower.
They just can’t get anyone to help so they just get in anyone and these people just go there do their job and they want to run to the next house to get paid.
They need to hire these guys that aren’t even qualified now.
And he could tell because sometimes what the house you have to see these characters are in my house when I was smoking in my house.
I don’t care how many tattoos you have or whatever.
I really don’t I don’t judge anyone.
But when your pants are hanging down you underwear hanging out and they’re hanging like like off of your knee and you smoke in.
And you have three teeth in your mouth.
You know, I’m worried a little worried gonna be a little worried about a guy like that a little bit right? And again, I don’t judge anyone.
I don’t have any teeth you have I don’t care.
I don’t think I’m not gonna judge you.
I treat everyone the same.
You never know.
You’re talking to always.
But man you smoking in my house in my garage.
Are you kidding me? These are the people that had a higher the man strong.
That’s funny because I got a two screen enclosure over my pool.
It’s really supposed to be one story, but Yeah window building a house didn’t really show on the diagram because I don’t know how to read this stuff again.
They sure it’s it’s ma**ive.
Right just you’re looking at all these lines construction again all Blueprints and you know, really don’t know what’s going on.
Aren’t you first house? Right? You don’t know you don’t know if one walls like two inches higher than the other one and we saw like Walter off and they had to redo the doors already and stuff.
But you know, we realize that one screen enclosure.
There’s windows in the back of the house.
It’s nice got a nice view out there.
It’s gonna go the beam goes right across so we see don’t get a two story or no story.
On no screen enclosure and we said all right.
Let’s go for two story which a little bit more expensive so okay fine.
So we go to the pool vendor.
Who’s over the house? They’re doing the pool.
And I said hey, do you guys know anyone just short? I’ll hook you up.
I know a guy I will hook you up.
Definitely I like young and hook you up.
You’re the best world.
Next day the guy with me he’s with me and she’s and she happens to come to the house as well.
Right? Should I get to meet my guy? So go to the guy he’s measuring going back and forth and you know doing his thing and saying, okay, this looks good or whatever.
I’m like, okay the guys like alright, it’s gonna cost 115,000.
First for Metal and his screen right for Metal in the screen.
now my pool wasn’t done yet.
If it was I would have dumped this guy’s head in it like 10 times.
I’m not even kidding.
That’s how pissed off I was.
I have a screen enclosure on my current house.
I know how much they cost.
I know even how much they cost would inflation and this guy just tried to rake and you have to realize and first he was a high pressure sales person.
He was like, you know, you should book it.
Now you book it right now and sign I can’t come for another six months all these guys a book.
You’re not gonna find anyone not too many people do two stories enclosures.
Give me the whole sales pitch and everything.
I’m like really I was like, are you kidding me? Right? Of course, I do the research into this.
I’m like, there’s no way in cost that much.
There’s no way by the house in Someplace 115 that there’s no way.
And remember this is from a vendor that I’m using through my Builder.
So I’m already a customer not a new one.
You’re trying to f*** excuse my language, but in existing client, I’m existing one because you should be hooking me up with people right now.
Buy a new house.
It turns out everyone’s gonna get a piece of this to Builder.
Builder would’ve got a free check for doing nothing but 20 grand you got the pool guy would have free check for 20 grand for doing nothing just because I reckon that’s how it was.
So my neighbor really nice guy from New York and cool just you know has screen enclosure gave me this guy.
And he literally did it for one-third of the price.
Can this comes from my Builder who I’m a customer.
They’re still trying to screw.
Another thing happened is my allowances.
You know, I made sure we had a lot of money left over for extras.
And I got to tell you they burned through this like nothing like nothing like absolutely nothing.
I mean if it’s there they’re taking it.
So by the time they’re done that they’re like writing you check and say oh you had extra money left over no freaking way.
They’re using that and they’re gonna charge you even more.
And it’s gonna be things that you see during your house you like.
Hey, I want to upgrade this or upgrade that or whatever, right? So yeah, that’s where they really start banging as you see house getting built.
But the best part were the Builder actually gives you certain allowances and says here’s the allowances for the cabinets and you could upgrade to this and he’s allowances for the sync should upgrade to that the bathrooms and mirrors could upgrade to this well for the lights.
We haven’t allowance to build the games for our lights.
So I need like a bunch of ceiling fans lights and several rooms outside the front door above the island along the garage all these lights.
So like hey, we give you the guy this is the vendor we use go to them.
They’ll take care of you.
So I walk in and they’re like, oh, you know take a look at a couple things first.
I’m looking I’m like wow, you know lights are really expensive.
I don’t s*** about lights and that was the hardest thing.
I mean, you could find research about everything that you’re gonna build.
There’s like a billion lights like I don’t even know how someone say they could be an expert in life.
There’s like a billion of them.
There’s a billion.
Oh, it’s not like wow this this so many light structures fixtures.
Forget it would take it by six years to understand how you want the lights to be put in your house what you have to do electricity why but there’s just so many fixture structures everything that you like.
It just totally overwhelming when you get a pool you kind of know you can look pictures you get certain things.
You have to look bathroom design lights is a billion of them.
So I’m going in I’m looking like wow, you know lights are kind of expense and say how much is our allowance.
Well your allowance for the whole entire house is 1500 bucks.
That covered like two lights outside my garage.
So I have to use that vendor who’s gonna bang me out because I’m using the builders, right? They get 20% markup.
So again bang me out.
I said fifth I said really fifteen hundred.
I said, what am I gonna do what we want to get like five light bulbs? That’s the allowance.
anyway be done with my house by the end of this month hoping because people keep asking I like venting about it and bitching plus I don’t even knows how many people are in the same boat as me.
Plus this has to do with the industry as well.
And for me, I can’t get furniture yet because it’s so dust from the sheetrock construction.
So, you know, we’re very frustrated with almost there.
The house is pretty not gonna b****.
I’m getting a new house, right? But still it’s very frustrating when you’re excited.
They gave me a bottle of champagne When I close in December, I didn’t move into the house in April like what the hell you want to do with this stick up.
The guy’s a**.
I see kidding me.
Give me champagne after you didn’t even finish the house yet.
and I’m the idiot who closed but you know, we had everything contract they promised if we’re gonna do all this stuff and they didn’t do it which opens up the door to I’ve never sued anyone in my life, but You know now the cost of getting out of hand.
And it’s crazy and it’s frustrating.
It takes a toll on your marriage and you’re fighting and you’re arguing and stupid s*** and just you know kid guys walk it in with you getting stuff done for you know, your kids are studying and and you know waking up for school.
We look at home builders in general guys.
It’s nice when you have strong demand.
You have ma**ive demand and it’s still very very strong in Florida.
I don’t see that changing.
At least in Florida before when I hear from a lot of people in the industry that are emailing me they did talk about.
That’s definitely slowing down.
you have a few people if it’s in Texas to Florida, you see that’s where the migration is from major cities and stuff and even in the bottom, please like that, but You know low tax areas, but you in a lot of these states you’re seeing slowdowns.
I mean look at rates at 6.
8% close to 7% day with three percent what 18 months ago? And that’s significant significant amount of money for Middle America.
Now people are gonna pay cash for the houses or whatever or you know, part of 1% or even part of the two or three percent, but the majority of people are gonna take out a mortgage man.
I mean you look at a number that’s much much much much higher.
So humble is not gonna be the driver see much longer.
I know that there is a supply shortage.
I know I study the industry.
Team price will elevator for now but the next 12 months.
You’re gonna see demand full sharply.
You see falling a little bit in areas.
I live in it, you know have a house for my mom which I sold because she moved to the Villages and yeah, we didn’t get top price for that.
It was on the market for about three months four months and these things were going off the market in hours and days and I had to lower the price by about 15% and we still did very very well in the house.
I got I’m probably the greatest reason real estate investor never lived to be honest with you.
I’m just very very lucky.
I mean in houses that I bought we’re gonna buy a house.
I was super expensive at the time for us.
It was 500,000 which was above our head.
This is in 2000 and five six of my wife or probably not six probably let go from the street calm and then stands very hard on me had to go to Baltimore and then I was like, you know, they wanted me to go to Baltimore for six months.
I said, I can’t make it this sick so I couldn’t be a five months, Baltimore.
I’m not anywhere the world lives in Baltimore.
I have a lot of friends live in Baltimore.
Our industry is built in Baltimore.
I just you know live in New York.
Well, maybe not now New York’s not the nice city in the world.
But yeah, you’re paying high prices and you know, you walk down the wrong block you’re done.
You know, I mean Baltimore Baltimore series.
I mean you people think the organic I mean Baltimore serious when it comes to crime they don’t mess around.
But I was like I’m out of there went to Florida and happened to buy a house in 2010 which anyone about a house in 2010 did very very well.
I bought my mom’s house early too and this other house about two years ago.
It’s in Florida and Florida price keep going up.
So maybe we should get a job in real estate.
You just say hey, I’m a genius.
That’s the investor in reality.
I just got very very lucky.
Right? So like a fire at the right time not fire, but let go from Street.
And sometimes things work out.
Sometimes the moments that you think of the worst turned out to be the best.
Think about that that’s a little deep, but I’m dead serious.
But you’re looking around the US.
You see in demand? starting to fall You know again where I live right now, we’re gonna sell this house this current house to move into our new house.
We didn’t sell it.
You were getting fixed up a little bit but they’re for kids, right? Oh my God so much crap not to mention how much you need to really update the house.
And you know, it’s on for an ID to beach Amelia Island and those prices.
I mean, they’re still going like hot right off.
The market price is still, you know doing well in some areas, but not all areas of frog so you see in demand starting to fall off gonna be interesting to see the home builder.
Should the home build be trained their 52 week highs right now, not 50 guys all-time highs all-time highs business is better than it’s ever been because I could tell you when I looked at the latest reports.
Look at that backlog of business over the next year.
I mean someone dropping It is fill in the orders.
And usually it’s 12 18 months.
But if you look two years out you look at those backlogs.
I mean, they’re starting to fall off a cliff right now.
And it’s crazy.
Okay, you still keeping prices up a little bit because Supply but man.
Home builders all-time highs where rates are right now with a recession likely going to happen.
I don’t know.
Doesn’t train at all time all-time all-time highs.
Maybe you have some Home Builders out before me and it did great inventory getting off the books.
That’s apply agreements locked in place.
It fixes Supply chains getting stuff to houses, whatever but at all time highs.
crazy when you think about because of my home sart event.
If you’re gonna build your own home, which I hope everyone seriously, everything is hope everyone listening.
This gets a chance to do one day.
I mean where in the world that we have to apologize if you’re doing something like I’m not apologize for s***.
I mean, I’m 50 years old.
I work my a** off to get to this point to build my own house.
I hope everybody does everybody deserves that and maybe some of you don’t want that.
Maybe you want to rent and that’s cool.
And you know, you pack up and move and go to whatever you want.
Yeah, this is really cool.
And it’s funny how you almost have to apologize for it, but I can’t talk about my house or whatever or you know, post videos over.
You know, it’s like you the enemy if you know you bust your a** and you do okay? It’s kind of funny the way you know that used to be the American dream right work hard work harder than anybody else should be successful.
But now he’s successful.
They want to take everything away from you.
You’re the enemy you’re terrible reparations.
Give me money more taxes.
What a difference.
been I hope all of you in this position, but if you do decide and hopefully you get there through some of my advice and helping you with stocks and Investments things like that.
Let me know.
I mean, I’ll save you a sh*tload of money in aggravation.
I can tell you because I wish I had a redo in terms of dealing with the builder we deal with the vendors.
Contracts from the beginning allowances.
I mean, I’m a genius now.
I’m awesome at it.
Now that’s always happens when you get run over by a truck learning something for the first time right? Then become smart.
It’s kind of like stocks I said about my nephew Joe is great.
You know, he lost a lot of money I said, that’s the best lesson now when you get your a** kick, when you’re young first, we have working power you’re gonna make plenty of money, but now, you know, you got to take a step back you have to understand it’s not as easy as you think.
The important I mean just post the videos is the easiest thing in the world.
Then you see him getting absolutely destroyed.
This is serious Wall Street series.
Don’t take everything for me.
It’s not easy.
The learning something for the first time and you get run over my truck, you know use my experience.
If you need any help have any questions, I’ll help you out should be over to email.
Let’s move on to the markets enough of me bitching.
All focus on CPI, which is coming out after you listen to this just have to be in the schedule.
People like Frank, what are you record after it? Because I don’t want to be at work till nine o’clock at night the time everything gets produced.
It’s you know, it’s gonna get you can see CPI reading later, which is cool because I love commenting about it and giving a prediction or You know just forecast that could make me look like an idiot, but you know, I don’t mind because you know, we do the homework and I like throwing things out there.
and being you know I hate playing Monday Morning Quarterback, like people love to do.
Tell you everything afterwards.
This is why the Fed s an idiot everybody see Gene now, let’s do it before.
All right, let’s that’s do before so he can hold me accountable.
Because this report in CPI that you’re going to see and you’re gonna have that number when you listen to this, but it’s very serious.
It’s very very important.
And last week we saw what do we see unemployment data from April come out.
This is a week after the Fed meeting with power raised by 25 basis points and during that meeting what she was fidgeting and nervous and stuttering and stuff like that, which you should be because the Fed has no clue what to do.
They have no idea what to do and and nobody knows what to do.
Nobody does I mean some took the common saying okay, they’re pausing and it looks like they’re gonna lower rates.
You know, which we saw I think the Fed Fund’s Futures right predicted after his comments that in June.
Next me is a 35% or 34% chance that they’re going to cut rates.
well I don’t know about that.
I’ll dig into that in a minute because getting it back to unemployment rate if you look at that report it fell to 3.
4% Okay, the last time we saw a percentage like that on unemployment was That’s a pretty long time ago.
It’s when Apollo 11 landed on the Moon.
Woodstock took place Charles Manson was murdering a lot of people the doors and the Beatles were actually still playing Live Events.
Okay, that’s how long ago the unemployment rate was this low was this low what happened to the recession? What happened to oh my God, but more importantly making matters worse for the Fed not for workers.
They’re doing fine.
They making money.
So the Services industry what makes matters worse for the Fed and what I had no clue because it never been a situation like this is Wages also went up in April.
Think about that again.
We’re supposed to be going to recession to slow down even GDP numbers are going higher.
Okay, this is incredible report considering we are supposed to be at a point where everything’s really really slowing down and things supposed to get worse and they’re not and we heard this story for 12 months for 12 months.
and even 18 months, I mean you can go back to November October even before that when the Fed s talking about inflation being transitory I mean, you know, we’re putting these forecasts like oh, you know the highest they’re gonna go is two percent three percent four percent.
Now, it’s five percent.
It’s over 5% of headphones, right? I mean the gradually been raising it because we were expecting this to slow down so much quicker, and we’re still expecting it.
We still expecting it, but it’s not really happening.
Is it? Is it? Because I could tell you what unemployment at 3.
4% and wages Rising.
How can the Fed even think about cutting rates? Again, after the meeting the odds of the Fed cut went in June went up to about 35% Now you’re gonna say Frank.
You’re an idiot.
You’ve no idea you’re talking about there’s a banking crisis seeing commercial real estate market cracks in that.
So the Fed has to start lowering.
Well, how can what’s the best afflation everything that could happen Banks fail automatically? Okay, there it is riding on the wall.
That’s what people interpreted from the meaning.
I didn’t interpret it.
I actually listen to Powell.
Because what Powell actually said is biggest risk on the table right now is inflation and the goal their number one goal is to get inflation back to 2% that’s coming out of his mouth.
That’s what he said.
in other words In other words, he’s not concerned with the banking crisis in regionals.
causing systemic risk where it’s gonna filter down to the big bags and ultimately to the economy.
And it kind of makes sense like use common sense forget our numbers and s*** like that right over the numbers.
I just think the large banks are more capitalized.
Than any other time in history.
They’ve never been this large.
Most are reporting record Revenue right now.
If you want to provide they reported a hundred and ten billion dollars in sales the four Banks last quarter.
And those are the oil companies would be taxing this s*** out about and throwing them saying don’t completely under the bus every SEO needs to go to jail for oil and but this is the banks.
These are the bank so it’s fine.
Let’s throw it out there 110 billion from the four banks in sales and some reported record Revenue, right? They’ve never been stronger Capital ratios have never been stronger.
So Powell’s right.
I mean systemic risk over to the big Banks.
You just keep handing these to the big Banks.
Who cares a few Regional Banks go out of business is 4200 of them.
How do we get to 4200 Regional Banks? How’s it possible? I mean, he’s probably good at some of them are going out of business.
Anyways Bodega this I mean, it’s these Banks how many Regional Banks do we need? Are you kidding me? 4200 Regional Banks.
I didn’t know that so I started research and Industry the death of the past two months.
Well, she was happening 4200.
So who cares? Is that a big concern as these things fail? Could it create systemic risk? Maybe I provided that the case for that last week, maybe but not really.
You need to think about this.
Because the number one priority for the Fed has to be to get inflation on the control.
Why is that? Why is that so important? and simple because when inflation is low the Fed has full control.
They can keep rates low.
They can use QE to buy bonds stimulate the economy.
It’s why we saw the biggest bull market in a generation post credit crisis from 2010 2020.
Money was essentially free they were surprised I can’t believe inflation is not going higher.
Let’s keep racist zero and we had rates going much much High two thousand limit 2012 2013 14 remember pushing out 15 16 17 8 and they kept them low low low.
Because I didn’t see inflation.
It capitalized the banks the banks weren’t really lending out the money.
That’s who they gave it to during the credit crisis.
But this time it was different with COVID you handed directly to people.
Now I have inflation running wild.
This is why the CPI report is so important again.
You can have that number when you listen to this.
now according to Economist the CPI for April is expected to rise How’s it possible? I don’t inflation was moderating.
Well it is if you think about it depends how you want to look at the data.
It looks like a data and a positive inflation’s moderating.
I can give you 15 examples of inflations moderate.
Not to mention.
It was 8% last year and now it’s five and a half percent.
So it’s moderating at five and a half percent.
However Let’s be real here.
Let’s put in perspective.
5% Again, this number is completely acceptable all the sudden it worries.
So again less she was a percent but a 5.
5% Let’s exclude last year 2022 when it was eight percent and nine percent I think for a month or two.
Let’s just cool that for a minute.
So at 5.
5% the last time annual inflation cracked even 4% annual feat 4% was We’ve never had 4% before 2022 since 1991.
We are at 5.
5% We are still going higher.
But don’t worry.
It’s gonna go lower.
We’ve been here for freaking 18 months 12 months six months.
We keep hearing the same story.
It’s going to get lower, but it’s not going lower.
It’s going higher.
To over 5% with the Fed’s goal of getting back down to 2% That’s a pretty big deal.
You need to pay attention.
You know why? Because it’s mathematically impossible to get inflation at This year it won’t happen and probably not gonna happen in 2024 either.
I know it sounds absolutely crazy.
Of course, the total is gonna happen.
Now, it’s gonna happen a month from now two months from now.
We’re seeing it some of the data.
Well even going came to his census this week.
They came out analyzed this and said here’s what we think is going to happen with this report.
Okay, they’re expecting the same thing to consensus.
To go up about 0.
5% and then that will put the inflation rate of 5.
so Goldman after having their inflation Target near 2% to end this year and under 2% for 2024.
It just revises estimates.
It’s when now Goldman the biggest firm the richest clients that everybody pays attention to everybody hates, but they want to work their Goldman Sachs now expects inflation to close the year at 2.
9% this year And what are their prediction for 2024 December 2024, they’re expecting it to close at 2.
6% Think about that for a minute.
I mean maybe thinking hey two point two point four percent or two point six percent in 2024 that’s close enough to two percent.
Ah, that’s not what Powell said It’s now a power set.
The last meeting.
There’s someone that asked him everybody ended this year.
We get close to three percent.
Would that be sufficient would it be enough to be like? Okay, and he said absolutely not he said no.
It’s important for you to understand this.
because the Fed can’t be there to backstop the market anymore.
I mean it can do a little bit what they did the regional Banks.
And say it’s not a bailout.
It’s not a bailout.
Kind is a bail out.
I mean everything is son of a bailout.
I can always definitely a bailout.
But if you continue to bail out, it’s gonna result in inflation skyrocketing again.
And then the Fed totally loses control.
That’s the scariest feeling for the Fed.
When you have inflation, they have no control they need control.
That’s why the folks on inflation they’ll deal with a couple of banks going out of business.
They’ll deal with a thousand Banks going to the business as long as the main ones are fine.
It’s always not seeing it systemic.
The ideal commercial loans, you know just defaults going much much High we’ll deal with that but our goal we have to get inflation down somehow.
But what are we seeing instead? Not the banking crisis now is the inflation start to take higher again.
I mean even in the UK inflation’s back over 10% we’re seeing inflation rise and a lot of areas going how is that possible? With the amount that you raise rates by how is that possible? How we seeing an unemployment rate solo.
This is why you saw a stuttering bumbling man who’s usually in full control? You saw this two weeks ago.
He had no clue because he’s like And that’s how he should be.
Because we never been in a time like this where we’re supposed to see when you raise rates.
You’re supposed to be demand for off clubs.
It’s not falling as fast as they want to and yet you’re seeing very strong numbers with so many economic indicators.
You see weakness in some areas again, I could probably 15 data points at show inflation moderating and I can show 15 data points that inflation is not moderating for me.
The simple answer is this For you for your family, you’re paying your bills at your house.
If you take all your bills, right all your bills and you come up with that number.
I could almost guarantee you that number is higher than it was last month.
It’s definitely High than was three months.
It’s way way hard in six months and man.
It’s skyrocketed from a year ago.
So when you bring everything together, which is all the only thing that matters right you can point it well gas came down this month and we’ll put the food price… food prices not really come down.
Used car prices have come down.
Because they price haven’t come down haven’t seen that.
You so when you’re looking at your bills tuition’s not coming down.
They’ll never come down as long as government’s paying for it that they’ll rake ya as much they can healthcare costs US.
Health largest is Healthcare largest health care company.
We’re just raised my premium by 11% from my workers eleven percent what happened? I thought inflation was coming down.
This is last month.
They said the next bill going forward.
They’re raising it by 11 percent.
But if you take all the bills that you pay you’re still seeing inflation going higher, which is insane at this point considering how much that they raised.
So remember if inflation is low the Fed has full power to stimulate the market say goodbye bonds increase liquidity keep rates low.
That’s it’s priority.
They don’t care about anything.
They have to bring inflation lower because when they do they have control.
And that’s what they want.
And right now they don’t have control you soar that by this bumbling.
I don’t want to say idiot because I have respect for the Fed guy every guy that’s Fed .
Everyone’s gonna attack it.
I want to jump on the bandwagon and beat a guy and kick them death when he’s down.
But man, that was a different Powell that’s a different Powell.
We saw it’s something we’ve never seen in back of it.
Like he couldn’t really answer questions because he just it was like back and forth and people are pissed but the people are pissed.
Why don’t you come up with a solution? Oh inflation is clearly slowing is it it’s not clearly slowing if 5.
5% It’s going higher month over month.
It’s not clearly slowing.
That’s someone that doesn’t look at the data.
That’s just shouting out something on TV.
I look at the data.
It’s come down.
But now it’s starting to go a little bit higher.
But that’s 100% right? You have to control inflation.
Not start cutting because a couple banks failed.
So unless we see a huge market crash which could happen.
I don’t think there’s anyone out that it doesn’t believe we’re going to go into recession.
Or avoid it and I got to tell you looking back at history.
The market almost never hits a bottom.
Before the recess right? You always hit the bottom before the recession, right? So so we hit a bottom and now we’re going into recession where we’re going higher and higher but usually we see the market really go a lot low before the recession actually hits and recession’s not here yet.
Now what unemployment 3.
I mean they always go back.
you know six months from now, they’re gonna be like, you know, whoa, and you know, tell send 2024 which is meaningless, but that’s not the case.
We’re not a recession, right? But we’re going to see a huge market crash.
And yes the Fed looks at that.
They absolutely look at that they did when they look at Lehman failing.
It’s going to credit crisis went back to Congress get taught past.
Remember the outside of Correction, like holy s***.
Get him back in the room.
They’re gonna pa** this thing now.
They’re looking at the markets.
They’re looking at bank failures, right just recently and look what happened are we got inject money into the system because they had no clue then check the 30 billion dollars.
It’s got the big Banks together locked in a room said, yeah First Republic given 30 billion dollars, they’ll be fine and they still crashed and they still had to get seized by the FDIC.
I mean think about that with the Fed in all the top CEOs in a room and this is a couple weeks ago.
Not one of them stood up and said hey if we give him 30 billion, it’s still not gonna work.
That tells you that the smartest guys in the room in finance had no idea was going on and with the Fed do the Fed made it saw these Banks crashing and you know, they created special programs that give them money and whatever.
And bailed them out.
So they’re looking at the markets, but unless we get a full blown out crash in the stock market, maybe led by the bond market a clap some commercial real estate or something like that.
Don’t expect the Fed to lower rates anytime soon.
If they do they’ll be the biggest mistake.
They ever make as inflation is going to soar and it’s going to soar higher than it in 2022 and we’re seeing that now.
Simple Bell to the bank why is inflation going back up at this stage? Why is it going back up? I mean, I wouldn’t expect them to lower rates any times especially not this year.
And maybe not next year for inflation remains.
Well above 2% which again Goldman is now predicting for all 2024.
So by December, they expected to go by to two point six percent.
Which means that’s probably gonna be over three percent for the charity of 2024 who has that priced in.
Who has that priced in I think was 1.
8% Goldman had this is like three months ago that’s significant difference.
So Daniel and I gonna be breaking this down even further on tomorrow’s Wall Street Unplugged Premium podcast.
We’ll be giving you a new trading idea one that’s gonna be a huge beneficiary of rates Staying High.
Which we expect it’s gonna be good for this set of companies.
I’m going to pick one that we think is just in prime position and you’re seeing it right now.
I don’t want to give too much away.
If tons of new subscribers go into our premium podcasts, it’s $10 a month.
You get a newsletter, you get trading picks every week.
It’s really detailed also has some great interviews lined up over the next two to three weeks again, that’s gonna be exclusive to the premium podcast.
If you want to learn more go to WSUoffer.com.
Again, $10 a month and you cancel anytime this guy is it for me? Thanks so much for listening and I’ll see you guys tomorrow on Wall Street Unplugged Premium.
Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry.
The information presented on Wall Street Unplugged is the opinion of its host and guests.
You should not base your investment decisions solely on this broadcast.
Remember, it’s your money, and your responsibility.