Mohamed El-Erian is generally more correct than most, but the insufferable coded language he is required to use makes it difficult for the ordinary person to see exactly what he is saying. For this CBS segment, we will apply the decipher. [Transcript Here]
Notice this key phrase in the beginning of his discussion of inflation. “Of course, we know about the Ukraine war, we know about the energy transition, also the Federal Reserve mischaracterize inflation and fell behind.” No, Mohamed, most Americans do not know about the forced energy transition and how that has created this unavoidable inflation spiral. How about dropping the code and saying it directly? Joe Biden initiating the Green New Deal means much higher prices are permanent.
El-Erian speaks about supply side inflation, but doesn’t want to talk about the next phase, demand and service side inflation. The three month inflation data is higher than the year-over-year inflation data. That means inflation is growing. There is no way for inflation to drop when the most recent price increases are significantly higher than the previous price increases. Inflation is now detached from any intervention. WATCH:
Consumer demand for non critical goods are contracting at the same time prices continue rising (that’s stagflation). Demand side contraction, what El Erian calls “demand destruction,” means lost jobs (that’s recession). Food, fuel and energy prices all continue rising. The field costs are higher than current fork costs, and that (30%+) wave of inflation coming in from over the horizon is going to blow the doors off any economic growth. The process is unavoidable now.
The credit markets will feel the impact before the end of the year as consumers will no longer be able to make payments for loans, and still eat. Mortgage defaults will increase, vehicle repossessions will increase, credit card debt and bankruptcies will increase. The credit markets will get drowned in a tsunami of default. That’s the direct language El Erian will not use, but it is present inside the coded-language he does use.
If you did not purchase a house this year, you are ahead financially. Equity and values are plummeting.
I wonder how many have given thought the past 10 years of retirement gain in something as their 401’ks can or will be entirely wiped-out under Biden’s government policies?
This makes my decision to dump my 401K when I retired and invest it elsewhere seem better and better.
401(k) in and of itself is not a bad thing. Your employer is willing to invest in your retirement, that’s free money. Your employer gets to pick the fund pool, and you pick which funds you want to put the money into, that’s not great but not bad. The funds pick the same stocks { Facebook, Apple, Netflix, Google, Amazon, Microsoft } in different ratios… now we have a problem.
My employer decided that employees hired after a certain date don’t get pensions, they get increased 401(k) match, I kind of have a problem with that. My pension is locked as a function of my salary, the number of years I stay with the company, and my work performance. My risk is the company dissolves before or during my retirement, which is low.
Younger folk don’t have a vested interest in the company, and the company doesn’t have a vested interest in them. 401(k) are portable when you leave your employer, while pensions have a bunch of archaic rules. The employee works a long time, they get 401(k) match for a long time. They make more salary, they get more $ to put into the funds. However, if the funds go down, the retirement isn’t going to pay out as well… that’s a big risk. And if the individual chooses not to invest in the 401(k) for more $ today (very tempting with looming college debts), well, that’s also going to end poorly in the long run.
Undiversified 401(k), especially heavy in our progressive tech stocks, that is where the danger lies. In a recession/depression, no one needs to buy new Apple iPhones, or a new laptop running the newest OS, or the latest monthly streaming video services. You cut those expenses, which are going to make tech stock future earnings plummet, stock price drop, and all those indexes drop with it.
Under Trump we had achieved the magic number to retire in comfort.
I’ve been thinking of just cashing out all of my 401Ks, no penalty for me, and just pay the tax. But that tax will be huge as I’m still working and then what? Where do I put my money into?
I’m mostly into funds now. Cash is losing value, I can’t buy physical gold in my 401Ks, so the only thing that makes any sense, still, is in the global and defense stocks.
The other possibility, for my wife who is still too young, is to borrow as much as we can from our 401Ks and make the minimum payment into them. Then load up with physical gold.
There are gold-based 401Ks that you may be able to transfer yours into without penalty. Worth checking out. Mine was wiped out in 2008-2009.
The problem is the country is collapsing. I would not count on the government or any corporation keeping its promises. Maybe we will get through it like in the 70s.
I learned 401k is better, at least until the government figures out another way to make your money not yours. My dad had a comfortable retirement until (while in retirement) the company declared bankruptcy where the court approved the creditor payout plan which eliminated pension payouts (thank you again federal gov’t, Pension Guaranty Benefit Corp).
I’m 90% in cash right now. The stock market hasn’t seen the bottom yet.
How is your fuel budget?
In brief, Uncle passed away in April and left beneficiaries his home free of debt. In California. Its like pulling teeth trying to get the dumbed down low info idiots of the family to understand what is happening and move quickly to sell the house before the value plummets. I just go through texting with the twenty something r.e. agent assigned to list property where I questioned his knowledge of the current and near future market conditions. I will not allow him to take his sweet time.
Its a combination of self pride and good old fashioned leftist stupidity.
Hope and pray the house sells soon, whether or not your idiot family members ever get a clue.
Interesting how the “experts” come out with their “woe is me” 6-months after many nobodies seen the same thing back in January. College is where kids go in smart and come out dumb and stupid. Imagine having this guy as your professor?
These geniuses knew about this 6 months ago, they just didn’t want to go against China Joe. Now they have no choice.
I am glad I can care less about China Joe.
Fangdog. Don’t know if others have complimented you , but you do deserve much credit for calling SM top at beginning of Jan. I listened but not enough. Well done.
Thank you and I do appreciate it.
I am not the only one by a long shot. There are two types of approaches when it comes to the markets. There is the technical approach as to market timing and there is the fundamental analysis.
To me the fundamentalist are the bullshitters They get paid by bullshitting the public while getting paid for it. Professors are in this category. For me it is either there or not there. I care less what is going to make it do this or that. All I care about is when it does either one, I get an indication which one up or down.
“I could not care less”
A small reminder I was glad to receive not long ago.
Thanks
Thank you for repeating it. I’m sick of hearing fools say it incorrectly.
You better constantly carry a barf bag with you. It doesn’t take much to09 make you sick. Lol
Lose/loose
Site/cite/sight
Speaking of bullshitters, I have been forced to conclude that the average stockbroker/employee of Merrill Lynch/MSSB/Bank of America (not all of them, but too many) is actually being compensated for treating their “clients” like mushrooms, spreading “our top expert analyst’s” BS and keeping the average investor in the dark about the glaring truths.
The job, it turns out, is to herd the retail side sheep to the shearing with false assurances (that the 60/40 portfolio is fine, that inflation is temporary, that the nearest point of comparison is 2008 not 1929, that the idea that the dollar is losing world reserve currency status is a loony conspiracy theory). I have run out of the ability to excuse the obviously provable idiocies as merely incompetent.
In short, these brokers really get paid to be the walls that are set up to blind the cattle to the fact that they are being herded to the slaughterhouse — so they don’t panic too early, before the big boys on the other side of the loss sales can collect the lucre.
Really nice people on a personal level, but the whole system is rigged and corrupt, at every level.
Exactly, this is NOT 1970s.
You point out a description perfectly of what and how it really is.
My house will be paid for in 6 months.
My 29 y.o. son just bought a nearby home for about $20k under current market. 3 br + 2 baths.
His solution is he has plenty of friends whose credit was ruined in the last house bubble.
He has two renting from him now. Just one pays enough rent to pay tshedhe monthly ppayment.
There are lots of these out there now and will be more soon.
If you have a basement, or can even put a large pr two in the yard, you may have an income stream. Of course this only applies to southern suburbs or semi-rural areas. If you live in an over-regulated big blue area, well maybe spare rooms and basements.
“or can even put a large pr two in the yard”
What does this mean?
Missing word plus typo I think. “Large shed or two” is my guess.
My question though is shouldn’t some of this reset or abate with higher interest rates and a recession? Both will have the effect of tightening the money supply and reducing inflation which should act to counter inflation (at least to a degree.)
What am I missing?
The general economic consensus of thinking people if I may be so bold as to summarize is that yes, higher interest rates which correspond to a tighter monetary policy will abate inflation at some point at some level and cause a recession of course. The only questions are: How bad are the fundamentals and how late is the Fed in moving? Will they continue to do what is necessary if a recession becomes too painful? Will they even allow a recession? Can they? What effects will further executive actions have on an already over-regulated economy? Will Congress attempt to help by sending more checks? And about a hundred other questions but, that’s a start. Much is missing. Much can never be known for sure. We will never suffer from a lack of people claiming full knowledge and ability to manage multi hundreds of millions of people with made up economic numbers created by John Maynard Keynes and abused almost as badly as many other sciences but, with profoundly real results in terms of human prosperity or misery.
There are some sources of confusion in any talk about inflation, even if not connected to the Green Raw deal. Two main areas.
First, it’s important to know whether a monthly number is the actual inflation that took place during the month or what a year’s inflation would be if prices increased at the same rate.
Second, when we talk about the “rate” of inflation, we have to think about these things:
(A) Price on an item or group of items right now.
(B) The rate at which A has increased or decreased over some period (which needs to be specified).
(C) The rate at which (B) has increased or decreased over some period (which needs to be specified.)
When people talk about the “rate of inflation,” it could be either (B) or (C). It needs to be tied down in each case.
If we make the analogy of price to distance, (B) would be like average speed, and (C) would be like average acceleration.
And beyond those considerations, keep in mind that most inflation indexes the gummint uses EXCLUDE FOOD AND FUEL “because they’re volatile”
What the hell else do you spend most of your money on each month but food and fuel? (and mortgage payment or rent)
“Volatility” is not a valid reason to exclude food and fuel
It’s a reason to apply a smoothing average to them
You’re absolutely right, Nimrodman.
Excluding food is a real scam.
I smell a depression coming soon. The only way people of low income can afford anything now is to put it on credit and they will not be able to pay it off. Senior citizens are having their 401’s being wiped out. This is going to get ugly very shortly and what do they want to do right now, is take away our guns so we cannot defend ourselves.
Can’t those seasoned citizens pull out of their 401k’s and say buy gold now or are there still penalties for withdrawals?
I always get a kick out of people with “planners”. Their “planner” was a genius getting them in but how come that same genius isn’t so “genius” getting them out?
Something about commissions, perhaps? 😉
Most long-term financial plans depend on the market doing well on average, and when it’s doing badly, you just wait it out until things are good again, which I suppose is fine if you’re not retired and depending on those funds right now. I don’t think anybody has a contingency for the market tanking as soon as they need the money.
There are penalties for early withdrawals. Gold is no safe haven but, maybe not as bad as others. Oil and to a lesser extent other commodities are what outperformed inflation in past episodes like 73/74 which some are comparing this to. But indexes are indexes. In any environment, people continue to innovate. Individual success stories will exist. Just sitting on the sidelines in cash is not a bad way to ride it out. You earn nuttin but, you risk nuttin. Except inflation risk and the loss of buying power from not investing in something to try to keep up with the animal unloosed.
Thanks for a straight answer. 🙂
Whatever you withdraw during retirement, you pay income tax on. The tax rate you land in after your standard deduction or write offs if you are lucky. Both Reagan’s and Trumps tax cuts cost e deductions and put me in a higher tax bracket.
The problem is very few people know how to use tax-planning. Trump with his Investment Tax Credit gives an opportunity as no other. However, very few people understand how to use it.
Roth accounts can be withdrawn from tax free, but you have to wait until you’re a certain age (65 and a half, I think) before you can withdraw without penalties.
One caveat: sitting it out in cash is the obvious strategy for the moment, aside from risking staying in energy, commodities, miners, and maybe utilities. But, if this turns into Weimar level hyperinflation, it is going to be important to move quickly into hard assets or stocks in of solid companies that have hard assets and the ability to endure a depression — or else your $300k that you sat on while the market crashed 40 percent (good move), might rapidly vanish as bread starts to cost $40 a loaf (bad move).
Ironically, the best investment right now might just be a train car load of pasta, or a truckload of gas. Probably a 40 percent return on the value of your money by October.
Not sure whether deflation would hit first, or hyperinflation. But, timing is everything.
EXACTLY!!!
The other possibility is to keep an eye on the rate of CDs.
Back in 81, CDs topped at 18 3/4. My folks, who were not rich but good savers, had about $8K or so at an average 14%. It got them to cash them all, paying the penalty and reinvest at 18%, they were ahead in six months.
About 24 months later inflation was running about 8% (or less) and they sat at 18%…
Maye that’s what I’ll do: cash out a big chunk of my 401Ks, pay the 40% income tax on them (state and fed), buy some physical gold and keep an eye on the CD rates.
Another, better? possibility is to use our IRA accounts, which are in CDs, and take our 401K funds and put them in there… as self directed retirement accounts.
I think I need to talk to our tax lady.
I don’t have the same aversion when it comes to cash as some do. Cash has always been King. When no one else has it, but you do then you are in control. It reminds me of a gun. When a room of 100 people and you are the only one with a gun… you control the room.
You can keep your money in your 401k, but move it basically to cash. I moved most of mine when Jobama was selected. Pays a very low interest rate.
Exactly! Don’t take money out of your 401k until the IRS requires at age 73!
Do not leave it in money market. The laws changed, money market funds will be gated for the funds benefit unlike 2008.
Funds are setup so there is a bit of a paperwork gauntlet to get funds out. Or your employer can forget that account you had with them. It was tiny anyway. No biggie. If they are over 65, there is no tax penalty. If not, it is 10% AND they may have to provide a reason for pulling it besides the economy. It took me about a week to do in 2008. But I heard tales of it taking others much longer.
Remember that scene in Braveheart where they used sharp sticks? True story.
The only way people of low income can afford anything now is to put it on credit
Or they get EBT, housing assistance, heating and air conditioning allowance, walking-around money, yada yada yada …
y’know – those other “people of”
Bank of America recently issued a warning “inflation shock” isn’t over, “rates shock” is just beginning, and the “growth shock” is on the way.
The June 10 inflation report shows that food prices soared by 10.1 percent and energy prices increased by 34.6 percent year-over-year. Since the beginning of the year, natural gas prices have increased by 141 percent, gasoline by 91 percent, oil by 61 percent, iron ore by 45 percent, wheat by 39 percent, and soybeans by 33 percent.
Geopolitics, and “extraordinarily misguided” energy policies of the world’s seven largest economies, have resulted in a “commodities shock” unlike any other since the 1970s.
The economic growth for the first quarter was negative 1.5 percent, and the Atlanta Fed GDPNow prediction for the second quarter is only 0.9 percent
Bank of America Warns of Future Inflation Shocks, Declares ‘Technical Recession’ (theepochtimes.com)
The new PT job I just started is with the largest storage space facility. During my “7 day training”the client base changes greatly, even in locations withi the same city or 20 miles away. After 7 days you are charged a late fee of $20 on a $ 100 fee (monthly). Since food and rent are always paid first , I expect a lot of spaces going to auction or people eliminating their storage spaces. Surprisingly, I never realized so many people rented these spaces that cannot afford them . Before I applied for the job I had rented my first storage space 15 months previous. It seems like a quite profitable business for the owners but from my viewpoint a little shady. Jmho. Pray and pray more
“a quite profitable business for the owners but from my viewpoint a little shady”
Can’t fault the owners for selling a service
Look to the storage renters
“A sucker is born every …”
— some guy said that
sentimental lofo saps that pay $100 a month to house used junk that wouldn’t bring $200 at auction.
Storage Wars fan?
I provide estate sales and cleaning to people who need it– for free — when they cannot afford it, either financially or emotionally.
I help the elderly have living estate sales so they can get cash from the junk they’ve accumulated over their life-time, and I help hoarders who, for whatever reason, continue to bring “stuff” home.
Right now I’m working with a woman who is being threatened with being evicted from her apartment. She can’t pay her rent, yet she has three storage lockers, three large storage lockers that are packed with stuff she thinks is valuable and will make her money — someday.
Right now my “job” is to keep a fire under her, and do it in a way that does not rob her of her self-worth and dignity, so she’ll pull out as much junk as possible and help me help her by putting it up for sale now — when she needs money.
I think a lot of the people who rent storage space are hoarders who truly believe that one day their hoard will save them.
My first time using two units was last Fall. Sold my beach side condo and lived with my gf while looking for a home further in land. Worked out very well for me.
I once knew a guy planning to build one because the economics are pretty good. Few ongoing expenses, so once it is paid for it is almost pure cash flow. As long as you keep a respectable occupancy level. Lost track of him and don’t know if he ever did it or not.
I don’t see how it’s shady. Storage unit companies are offering a legitimate service, and they are within their right to recoup costs by auctioning abandoned units.
I can’t wait to nullify Jen Granholm’s blight!
https://thepeoplescube.com/peoples-karaoke/can-wait-nullify-jen-blight-t22910.html
Ukraine war and Putin, what BS. How is it that during Gulf War when all the oil fields were on fire, gas and inflation were not out of control? Never listen to El-Erain, he’s a huge apologist for the progs. I’d rather watch a Geiko commercial.
at least you know the gecko makes out in the end
About six months back I read an article about the credit card companies raising interest rates on credit card debt while simultaneously lowering borrowing limits. The banks knew this was coming and were/are limiting the ability of people to use credit to stay afloat once their saving runs out.
Question about this (last paragraph): “If you did not purchase a house this year, you are ahead financially. Equity and values are plummeting.” How does this happy to refinancing a reverse-mortgage? Anyone??
If you have a reverse mortage then you’re basically in the same position as someone who just purchased a house. The problem with plummeting values is that you may soon owe more on your house than it is currently worth.
Damn. So would refinancing at this time (and I keep getting good offers) be a plus or a minus??
Refinancing at a lower interest rate is always a good idea. It won’t increase the value of your home, but it will reduce the amount of money you will owe over the long-term.
Thank you!
He forgot to add that governments over promising goodies to the nonproductive will put the squeeze on citizens. My RE assessment and taxes went up. Buden will raise taxes if he can. We can’t depend on closeted Democrats nee Republicans to stop him. If we can get out of this mess without a Depression it will be God’s doing not man’s.
“If Biden gets in, you are going to have a depression like you’ve never seen. By the end you’ll be lucky if you still have a country.”
Donald J. Trump
Quoted from memory, so not his exact words .
With 15,000 mostly Venezuelans entering the country this week on top of the prior caravans, the country part is looking dubious by the day. Will we be like Mexico, run by drug lords or like China. What a choice/sarc.
Others have been less coded than usual like Jamie Dimon using the term economic hurricane. Other notables include Musk and Bezos. As one gets less well known or followed one’s ability to speak hasn’t quite been snuffed out yet and many are less tactful or coded. It’s gonna get ugly and all cause of that energy transition thingy that no one can talk about. Or things like Jan 6. Lots of things are no longer allowed to be discussed except in whispered conversations or places like this, what they call alt right boards or wide open substacks which are likely to come under increased scrutiny as time goes by while the sites peddling sexual perversions are given a boost. Those outside the matrix can expect to be increasingly ostracized and feared, considered as obstacles to the needed progress.
Jamie Dimon at JPMORGAN attached President Trump every chance he got and gave millions of dollars to Biden and the Democrats. He’s getting exactly what he asked for!
Dimon has an interest in the Milwaukee Bucks along with fellow billionaires Marc Lasry and Wes Edens. The reason I bring this up is because one of the most important Senate elections is Ron Johnson’s seat in Wisconsin. Daddy Lasry is trying to buy the seat for sonny boy Alex Lasry. Alex is most known for using his influence to jump ahead of old people for a covid vaccine.
Hey, at least professional athletes, musicians and actors will get higher contracts due to inflation. I wouldn’t want them to struggle filling up their jets or being able to pay the charter prices.
Who the hell is he?
I bought a new phone at a brick and mortar T-Mobile store yesterday because mine was about to bite the dust. When asked, they candidly admitted phone sales have slowed down from last year and since they earn commissions their paychecks are also down.
We bought propane in September ’21 @ $1.65 gal. We refilled in Jan for $2.87. Just this week it’s over $5 gal. I expect it to be $7 by September. This is unsustainable and criminal.
That’s insane!
Yep
FUBARed whatever it takes to destroy the USA.
but keep juggling the books by all means.
You’ll be digging for potatoes this time next year.
The early potatoes.
Joe: C’mon man! “I’m sure it’s Green Nude Eel.
Okay, okay, okay… more social spending at 8:30. No thanks.
Every day I wake up and am thankful I have a relationship with God, a roof over my head and food to eat. The rest is “gravy”.
I can’t entirely convince myself that this sort of analysis is overly pessimistic.