SKEPTIC’S GUIDE TO INVESTING
Straight Talk for All, Nonsense for None
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Your Hosts - Meet Steve Davenport, CFA and Clem Miller, CFA as they discus the latest in news, markets and investments. They each bring over 25 years in the investment industry to their discussions. Steve brings a domestic stock and quantitative emphasis, Clem has a more fundamental and international perspective. They hope to bring experience, honesty and humility to these podcasts. There are a lot of acronyms and financial terms which confuse more than they help. There are many entertainers versus analysts promoting get rich quick ideas. Let’s cut through the nonsense with straight talk!
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SKEPTIC’S GUIDE TO INVESTING
Higher Inflation Numbers: Fed Policy Challenged
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Inflation expectations and their impacts on the economy take center stage in this episode, as we explore the challenges facing the Federal Reserve and the resulting market volatility. We discuss the interconnected roles of tariffs, immigration, and political influences on inflation, and offer strategies for investors to navigate these turbulent waters.
• Discussion on the latest inflation report and its implications
• Analysis of the Fed’s direction and market reactions
• Exploration of inflation expectations and consumer behavior
• Examination of tariffs and their impact on pricing
• Insight into immigration's role in the labor market and inflation
• Consideration of Fed's political influences on monetary policies
• Recommendations for adjusting investment strategies in uncertain times
• Call for listeners to engage and share topics for future discussions
Straight Talk for All - Nonsense for None
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Hello everybody and welcome to Skeptic's Guide to Investing. This is Clem Miller, and I'm here with Steve Davenport, and today we are going to talk about the latest inflation report that came out today I think this is the 12th of February, and so we're going to talk about the inflation rate, we're going to talk about impacts on potential interest rates, we're going to talk about how this might play out, going forward with things like tariffs, and we'll see where the discussion goes, steve, so why don't you start?
Speaker 2:Well, clem, this is just another example of what I'll call Fed lack of direction here. It's not been presented to us that the next move by the Fed might be up. In fact, I think they've been indicating how supportive they want to be and how engaged they are in reading the data, but now the data is pointing the other way, right. So we've had a reduction in some of the wages and services and now we're starting to see a shortage of some of those services because there's questions about immigration. Shortage of some of those services because there's questions about immigration. And we're also seeing goods eggs in particular as an example but oil and others that are going up. So if the price of goods is going up and the services are going up, that's a bad combination for a Fed that wants to lower rates to help the economy. And if we look at what's happening with the new government, the new government is saying we're going to do things that might also be inflationary, and so I think that the Fed is in a very hard place here and it's been kind of a result of their own actions. They were quick to do cuts this summer and twice in September, and they said they had to do them. They needed to lower the rates. And guess what? The lowering of those rates 1%. What did it lead to? It led to higher costs for some of the goods. I don't think you can expect to lower rates 1% and say I'm shocked.
Speaker 2:There's been a reaction in the marketplace. You know the way this works. When you open up more funds and you increase the availability of those funds, therefore people are going to borrow and do more. So we were constricted when the mortgage rates were up to seven, seven and a half, and now they're down to six and a half, six and three quarters Still not what I would say is really good for housing. So there's people screaming on the real estate side that we need to lower rates for housing, but the rest of the economy is still showing more inflation than the Fed wants. So here we are with a Fed in neutral.
Speaker 2:But I think the bigger question that Mohamed El-Erian mentions today on Bloomberg is I don't think they have a strategy. And if they don't have a strategy, then, just like every other influence on the market, it's going to make volatility greater. And so if we have volatility in government in terms of which programs are being cut, which people are being affected, which areas of the economy are going to be hurt, and then we take the Fed in a neutral position and not really in a supportive position. We're setting ourselves up for more volatility and as a seller of options, I tend to welcome this, but as an investor long term in equities, I tend to say things are going to get interesting and I think that what we need to do is realize the humanity of the Fed.
Speaker 2:They are a group of people who are trying to do what they think in their region is going to help their particular part of the Fed infrastructure and, in some ways, a group of 10 people. Whether we put them on the Fed board or whether we put them on the board of IBM, they're going to be influenced by their experiences and their ideas and not necessarily by the economic models that their PhD students come up with students come up with. So my question you know my feeling is this is the worst of times. If you wanted a Fed, that was going to be wishy-washy and not really clear, and that's what we have. What do you think, clem?
Speaker 1:So I think that what we're seeing now in terms of an increase in inflation is a kind of a partial realization so far of higher inflation expectations. So if you look at, you know, last week there was a report you know the typical report coming out of the, you know, university of Michigan Consumer Expectations Survey, part of which was about inflation and there was an expectation of rising inflation. And that was because of, you know, you mentioned, steve, immigration, you know the issue of deportations of people who are working and you know, working in the US economy, especially in the agriculture sector, the construction sector, the medical sector, and the issue of tariffs. There are a lot of folks that are concerned about the impact of tariffs on prices in the US and thus overall inflation. And I think the third issue, not insignificant, is the effect of the bird flu in terms of, you know, obviously in terms of eggs, but you know, even beyond eggs, you know what if bird flu expands beyond eggs into other parts of the food system? So I think there are some concerns about that as well.
Speaker 2:So yeah, I think I mean tariffs have been put on hold in Canada and Mexico for a month.
Speaker 1:So but? But they're back on 25 percent with regards to steel and and aluminum coming from from Canada and Mexico.
Speaker 2:Not not that, that's everything, but how much is that of the overall imports?
Speaker 1:I mean, I got to think that's a small, but it also is stealing aluminum from around the world.
Speaker 1:So I think you know, I think that you know tariffs is a whole issue, right, but, but you know, part of the problem about tariffs again is the uncertainty about it, and I think this factors into the inflation expectations. Basically, what I want to emphasize, steve, on this episode is the fact that it's all about inflation expectations and not really about the last report. You can talk forever about what today's report was or the report before that, but it's a question of what are people's inflation expectations and about how they might impact, uh, their, their spending, uh, the prices, uh of their products that they consume in their own consumer baskets, uh, whether they can afford that, whether you know the economy, that is, the real economy, um, you know jobs and what, what not might be impacted and whatnot might be impacted. So I think people are concerned about that, right, the deportations, which, fortunately, have been less than what were promised, but still I think there are concerns among people that deportations will impact those sectors that have been buoyed or sustained by by migrants. So I think it's all about about high inflation expectations and that's why we're seeing all this volatility in markets, in markets, uh and um, you know, especially in the last week or so, uh, you've seen, you know, a whole bunch of ups and downs, mainly downs, uh, but you know, it hasn't been, you know, we, we, I think it looks like we've seen kind of a peak of this kind of positive movement that we saw through most of, through a good chunk of January and early February, or at least stability, greater stability, in January and early February. Now we're seeing, you know, a different picture of volatility.
Speaker 1:Now, how long would this will last? It's unclear. I think that you would have to see, you know, an abandonment of the two things that that president trump holds dear to his heart, which are tariffs, uh, and migration. And I don't think we're going to see him back off from those, I really don't. And so, and I don't, I think consumers, uh, are concerned that he won't back up, back off those as well, uh, I know that everybody says, well, trump looks at what the s&p 500 does and he makes decisions based on that. And that might be, you know, true, to a degree, but I don't think, I don't think he is going to let the S&P 500 affect what he's doing with migrants and with tariffs. Just just don't see that.
Speaker 2:And with tariffs.
Speaker 2:Just don't see that.
Speaker 2:Yeah, I get back to the Fed being in a bad position because they focus on the wrong things and I think when they think about stability, they think of stability in the markets and they think that's their third mandate, right, they want lower rates to help the economy and inflation.
Speaker 2:They want to have a low jobless number, and I think the 4% they're at now they look at as achieving their goal. But their third unstated mandate is market stability, and in my mind, they're focused on the 50% of the market who has investments, and I think that the 50% who doesn't is the one who's really getting hurt by inflation. And so the Fed, instead of figuring out how do I address the other part of the market, is still focused on this quasi third goal of market stability, and I think that, as a whole, they don't have as much influence and they don't have an ability to really affect that man on the street, and therefore I think they're going to fail because they're not in a position to succeed, because they're not in a position to succeed, because they're not in a position to even admit that this mandate exists.
Speaker 2:So I don't know how you address a mandate when you're not even really willing to say that you have this? I'm concerned about markets and I'm going to do what I'm doing now just because I want to stabilize markets and I want markets to improve. We've had 220 plus years in a row.
Speaker 2:I don't know how we get back to the average return of 7%, 8%, 9%, 10% without some negative returns in markets and I'm not sure the Fed is in a position where they want to incur the wrath of Trump because markets go down and he says well, lower rates, so you fix it. I think the Fed realizes they've made mistakes. They made mistakes going too late against inflation in 2021. I think they made mistakes in going a little too far. I think they've tried to make that adjustment, but I think, unfortunately, they just have this obsession with the investor class versus all classes and they can still protect the investor class, but there's a lot of people who are. We have a country we just passed 50% in private 401ks and I think that's a great move. I think we need to get that number to 70% 80%, but it's great to be at 50% and we're moving in the right direction in terms of more people implementing plans.
Speaker 2:I do think that the Fed is a long way off where they can say what we do for the investor class is really good for all classes, because it's a great majority of the people. I think right now they're in a position where they have to think about how do we do things to contract the inflation problems without doing things that are going to be specifically beneficial to one group, the millionaires and billionaires of America. So it's a delicate conversation. Powell must dance on the head of a pin in order to satisfy both the existing administration and all of the members of the board, and I think the dance is going to get more difficult as we start to talk about more deficits and how do we pass the tax extension.
Speaker 2:The tax extension for individuals will be the issue of 2025. And if they get it done, it will have to be done with a lot of histrionics and various twisting and turning around how they justify this as being good for everyone. I think that, when it comes down to it, it's beneficial to most of that same investor class that they're trying hard to make sure they don't experience losses. That, in my mind, makes it a conflicted discussion, because there are people out there who can't afford a home, can't afford basic goods, goods, and therefore I think that the Fed, in keeping rates where they are, is in some ways stuck because they don't know what's the path forward, given the tariffs and the proposals that Trump keeps talking about. What is the path forward, clem? What?
Speaker 1:should the.
Speaker 2:Fed do.
Speaker 1:Well, I don't. What I want to do, steve, is I want to ask you two questions, ok, ok, and then I'll answer your question, right? First, do you think that Trump will try to to fire Powell? That's my first question.
Speaker 1:Um, you know he's in recent weeks he's fired a lot of people who are supposedly, uh, you know, not able to be fired per uh, per law. So is he going to try to fire Powell, uh? And secondly, uh, is he going to do things uh to? Is he going to do things to? Is he going to put political people at lower levels within the Bureau of Labor Statistics? Remember, they're getting involved. You know, doge is getting involved in the labor department, right? Is he going to put politicals in the Bureau of Labor Statistics who will have a mandate from Trump to manipulate the inflation statistics? Do you think that that's a possibility? So you know, if you answer those questions yeah, he could fire Powell and the Fed could be working with manipulated statistics. Then I've got an answer for you about what the Fed should do what the Fed should do Okay, I do think Trump will fire Powell, but not now.
Speaker 2:I think he will fire him when this comes to a head. And I think it will come to a head when we start getting into all of the things that he wants to achieve with the extension of the tax cuts, all of the other promises of cutting tax on tips and cutting other items that are going to have a budgetary impact that he needs to come up with savings from. So I do think it's a little bit extreme to think that four or five hires or 100 hires, ultimately the labor statistics are based on baskets of goods and if you change the basket, then everybody knows about the change and everybody then can adjust. If you say you're going to change the basket and not tell anybody, I'm not sure that's more cynical than even I can come up with.
Speaker 2:So I thought I had an advantage over you, glenn, that I was more cynical and you were more idealistic, but maybe I am an idealist in comparison. But I think that we are in a period where we're going to see extraordinary changes, some of them good, some of them bad, and maybe a majority are bad. I don't have I right now have so many articles and things to read regarding all of these changes that I think we all need to take a step back and say how do these areas of the economy function the way they used to function? And I think that Powell is dancing and I think that the question is does he want to dance? And I'm not sure he. You know, I could see Powell stepping down or giving up, and then they're going to have to appoint someone new, and then they're going to have to appoint someone new and guess what?
Speaker 2:It's very hard to pick an outsider who's going to fit on that Fed position, and I think it's going to be a hard time for markets when that happens, because, as much as I might not find the value in what the Fed is doing, there are quite a few people in the market who are very comfortable because they tell them and they keep them informed of what their direction is and what their appetite is for risk and for lower rates. And I think that that kind of cozy relationship with senior Wall Street and the Fed and that kind of moving back and forth that occurs has created a comfort zone for people. And as that zone gets broken up and I think that we are going to get less comfortable. And if we get less comfortable again, my friend Mr Volatility he rears his head and some people don't like that. Some people don't like it when we have a Monday with deep sea comes and blows up trillion dollars in value. I don't like it either.
Speaker 2:But I believe that we're in an economy now that is going to have uncertainty because we don't know and it's hard for us to say we don't know. Uncertainty because we don't know and it's hard for us to say we don't know. But that's where I think we are for at least another three, six, nine months. I think we're either going to pass some of these things and they're going to become law and then we can look at. You know what? Do we think? The extension of the tax cuts is going to be Permanent, or tell me is it going to be permanent, or is it going to be another 10 years?
Speaker 2:What do you think?
Speaker 1:It's going to be temporary and certainly not 10 years, maybe three years, maybe five years. It's going to be temporary in my mind.
Speaker 1:I think that lowers the cost quite a bit. That's the political solution, right. But let me just come back to what some of the things you said, okay, so I tend to agree with you, when things come to a head with the Fed, that he will fire Powell, I think. In the meantime, I think you're right that Powell will do nothing until there's more clarity on the policies coming out of the Trump administration, and you know that's going to frustrate Trump. So there's, you know there's sort of an interlock, right. Trump is going to want Powell to do more to well, to lower rates further, but you know Powell can't do that without more clarity on policy. So there's kind of a connection there. I think that Trump has probably already asked his labor secretary to look into whether the statistics have been manipulated in the past, have been manipulated in the past, and he's probably looking for a way to be able to say, hey, inflation is actually a lot lower than what the BLS is saying. He may not tell the BLS to manipulate, but he may create uncertainty about the BLS. And so I think because of that, the Federal Reserve, powell and others are going to work on their own baskets. They're going to work on their own alternative inflation measurement systems if they can't trust the BLS trust, if they can't trust the BLS.
Speaker 1:The other thing I wanted to bring up about the Fed and about rates in general is this bizarre comment that Trump made the other day about how, you know, somehow sometimes Trump uses words and expressions that you know cause angst and you don't really know what he's talking about, or you don't, maybe he doesn't know what he's talking about. Our debt, our government debt, may not be as large, uh, as we, as is commonly known, because of fraud, and I really I mean, I don't think anybody knows really what he's talking about. Um, but you know, it's possible that one thing is he might say well, there's been a lot of fraud, therefore we're not going to pay X portion of our debt. That would be a complete disaster, given that you know, treasuries underlie a large part of the global financial system, financial system.
Speaker 1:So I was very concerned about that comment. And he's also made another comment kind of related to that. I think he's made another comment that really it's not short-term rates that he's concerned about, it's really long-term yields that he's concerned about, and that led me to think that maybe he's going to do some things to suppress long-term yields. So these two things are concerns to me, kind of red flag statements that make me worried. What about you, steve?
Speaker 2:me worried. What about you, steve? I think he's. You know, I don't know. I'm not going to pretend to step into the mind of Trump or Musk and be able to understand the nuance of everything they say, because we're obviously taking the perspective of how does this affect my investments? And some of these things are affecting your investments and some of them are really not and so what I think we need to do is really try to focus on the things that are and try to eliminate noise. I think that we have a regular, you know, I'd say we have a regular allocation to noise of 20 to 30% of what we hear in the media is noise and not really information, and I think now that percentage has gone up to close to 40 or 50. And I think we're not comfortable with that new level of noise.
Speaker 2:And what I would say is look, there is a. You know, the financial system has been and I hate to use this word, but it seems like the right word bastardized by what we did with Russia and the funds transfer system and basically freezing funds in the system that previously had gone through all sorts of political changes, and now we all of a sudden say your assets are frozen. And so, because of that guess what happens? People look for different methods of transferring funds and using funds that are not on the main system. They look towards crypto, they look towards other things and other ways to transport money. And I believe and this is just me, but I believe we're starting to get to two systems the good system for all the companies and countries that we feel are good, and the axis of evil for all of the countries and systems that we think are being done by people who are evil. And we take China, north Korea, venezuela, iran, russia and we put them in the access of evil. And we take the Euro and the Euro countries in England and the United States, canada and Mexico and we put them in the group of good. And we look for those people who are in between the Brazils, the Nigerias, the different countries that we think are influenced by either the good or the evil, and we try to figure out who they are and what they're doing.
Speaker 2:And I believe that this type of separation is not going to get less, but it's going to become greater. That's what bringing those jobs home is going to do. It's going to create more stability for those companies, it's going to be more expensive, it's going to be inflationary, but ultimately we can't have the cheapest labor in the world and expect to have the greatest stability. Those are two different functions. The utility function doesn't allow you to get both. If you want the cheapest, most environmentally insensitive location, indonesia is going to be pretty hard to beat. There could be others who come along and say maybe it's better in Africa, Maybe it's better in, you know. But we're talking about less environmental and less labor rules and those are the choice. We can continue to try to pursue lowest common denominator type of labor around the world or we can pursue what we consider to be a more appropriate treatment of the environment and the labor force. And I think COVID saw these camps in China and these campuses that were developed overnight to house people, so they couldn't go home, so they had to work at the factories. Keep them going.
Speaker 2:And we've seen some extreme things in the Ukraine. Is the US going to become part of the real estate group that redevelops Gaza? To become part of the real estate group that redevelops Gaza? Is the US going to go into military control of the mineral sources in the Ukraine? I don't think that's really where our bailiwick of taking AI technology to the next level and we're taking control of assets in other countries to try to make a profit. It doesn't feel like that's a reasonable path to go down, but we're talking about going down some pretty strange paths. So in my mind, clem, I think we're in a very volatile period. We're in a very volatile period and, in my mind, what the Fed's doing and their uncertainty about how to proceed is just indicative of the time we're in and we're going to have to get comfortable with our fundamental values. And I know, eventually you're going to buy some Bitcoin and you're going to feel better about yourself because you have the fear of missing out, and I don't want you to miss out either.
Speaker 2:I want you to be successful, klum. I want you to be comfortable and successful and have all the assets that only have a positive trajectory, but I'm not sure I can do that for you with crypto now. Maybe, crypto in the future, when it becomes part of the US Treasury? Maybe that's when we all throw in the towel and we admit that we were wrong and that there is value in something just because it's secure or just because it's controlled or limited supply. What do you think?
Speaker 1:ED HARRISON About what you covered a lot of territory, michael KRIGSMAN, are we going?
Speaker 2:to become a global surfer of different resources and trying to stick our hand in various things in the Ukraine and Gaza and Taiwan, or are we going to have more of a? We're bringing our labor back to the United States. We're bringing back to the United States. Onshoring is very much a non-engagement with the world, like we did before World War I. Offshoring and becoming involved in mineral rights in Ukraine and real estate rights on the Gaza Riviera is very much of an engaged US out beyond its normal reach right when are we going is a frenetic uh move by a, uh by a president and his administration, which really has no ability to prioritize what they want to do.
Speaker 1:There are so many ideas that are floating around, uh in you know trump's head and among his staff that it's just, it's just overwhelming. You know, people you know are talking about how people are talking about how you know it's flood the zone is the expression right, but honestly, I don't think. I don't think this really is. You know, flood the zone implies that there's a purpose, uh, to having so many uh policies that are floating around. Maybe it's to obscure some of the more negative things or or controversial things that might be happening. Uh, I don't think that. I don't think flood the zone is the appropriate term. I just think that there's a lot of uh frenetic activity and it reflects uh, you, it reflects a lack of understanding of many things, a lack of prioritization of many things.
Speaker 1:It's basically, as they say, you know, throwing crap at the wall right and seeing what sticks. I think that's what it's all about. It's not flooding the zone, it's not creating, you know, I used to think it was creating purposeful distractions, but there's so much of this stuff that's going on, that it's like gaza. Gaza riviera is a concept that is so crazy in my mind, uh, that it's not a flood, the zone, it is a throw crap at the wall and see what sticks idea from a guy, from a guy who's who looks at the world at from a real estate developers. You know through the lens of a real estate developer, that's what he's. You know that's what he's doing. It's throwing crap at the wall and seeing what sticks.
Speaker 2:I agree. I don't see. I don't see a permanency to any of these ideas. I don't see a long-term perspective. I don't see a discipline. I see a wide scattershot. You know like he should be in. You know, one of those shotgun shootings with the deep, with the doves right, he could go get together with the Vice President Cheney there and I think somebody might get shot. I feel like this is a shotgun approach and not a precise sniper approach to our problems and our you know, and the different things in the. I hear this week that you week that he's negotiating with Ukraine and Russia to make that happen, make a peace proposal happen, and I sit there and I go.
Speaker 2:If it takes Trump a month to fix the Ukraine with a peace proposal, I guess I got to ask why didn't we do this a year and a half ago? Proposal? I guess I got to ask why didn't we do this a year and a half ago? It feels to me like he is going after everything he can Again, like he did in 2017, he went after Obamacare and it didn't work and he wasted all of his capital. He feels like to me he's distributing his capital across 15 or 20 different issues. And guess what? I don't think that's the way to make something successful. I think he should be concerned.
Speaker 1:I don't think he's allocating his capital. I think he's just throwing shit at the wall, right. I'm trying to bring it down to an analogy that's more appropriate. Investment oriented. We can't just keep talking about throwing shit.
Speaker 2:I think we're trying to make this discussion about he's away for 16 hours and he's doing it.
Speaker 1:Allocating political capital in the way that Trump is doing is sort of like saying OK, there's 100 different crypto tokens out there, I'm just going to allocate 1% to each crypto token. You know, it's all crap in my mind. It's all crap in my mind. It's all crap, uh. So what's the purpose of? And it's all like throwing stuff at the wall to see which crypto token is going to do better than than all the others. Um, it's like, it's like going to the um, uh, to the craps table and putting your chips, you know, on every square, right?
Speaker 2:I agree. I think that what we're seeing is a misallocation of an opportunity. He does have a majority, he does have the ability to go forward with some things and if he picks the right things, aka get that tax extension, make it permanent. I think if you make it temporary, I think if you adjust only a little bit of the property tax level, I think you're going to have a lot of angry people at the midterm election. And I think that he's not thinking about the midterm elections, but guess what? I think he should be Because in reality control of government is not a given, especially with a three and a five seat majority in the two houses, in a way that's prudent, that gives everyone something that they can go home and say I won, I won for you, I gave you what we needed as a community and therefore you should reelect me, if not reelect more of us.
Speaker 2:I mean, I know it comes down to more than politics, but in reality life is a lot of politics and in my mind, the politics of the Fed, the politics of the Sovereign Wealth Fund, these are all just ideas that have some grounding in reality, but some grounding in political instinct and political activity, activity.
Speaker 2:So I'm not sure he's doing the right things to help the people in the House and the Senate because he's focused on so many issues and I have yet to see how many of the people who are not reelected or who are affected by Doge are in districts where the person, would you know, would say, hey, my district, this is going to affect 100,000 people in my district, that's. You know, we worry about defense contractors adding 10,000 jobs. If the government lays off 100,000 in your district in Maryland, is that going to affect anything? Is that going to affect any of those representatives getting reelected? I wonder if the layoffs and how that would affect those Democratic candidates in those Democratic areas would, just like the property tax, adversely affected one part of the country. I wonder if government layoffs are going to affect one part of the country. I wonder if government layoffs are going to affect one part of the country more than others and therefore achieve two goals, not one.
Speaker 1:Well, you know, everybody thinks that the main impact will be on, you know, virginia, Maryland, dc, the so-called DMV. But the impact of government layoffs is really a nationwide concept, and so it affects districts all across the country. Well, it does from a service standpoint, but my point is as voters it's a service standpoint, but also there are employees all across the United States too.
Speaker 2:It's pretty centralized, like what is? Every government agency except the CDC is based in that three-state area, right or three.
Speaker 1:The headquarters is yes, okay, but you know the headquarters is for many organizations is only a part of what you know of where the staff is. Staff are located throughout the country.
Speaker 2:Yep.
Speaker 1:You know, you have, you know a lot of agencies have you know, district offices, regional offices within the US, state-by-state offices? So you know there's a lot of, there are a lot of operations for agencies that occur outside of Washington occur outside of Washington.
Speaker 2:Okay, well, I think we might have gone a little bit far afield here on the original inflation results of today. So, let's get back to what do investors need to do with the information you get from today? How do you adjust your portfolios and how do you make an impact? If this is an indication of rates not going down but potentially going sideways or up, how would you play this in your own portfolio?
Speaker 1:So, steve, as you know, I am very focused on short interest and I uh am have been increasing and peg ratios, but I've been increasingly focused on using beta as a kind of way to dial up and dial down on um, you know, on risk uh related to the market Um, and in addition, I've had you've had gold and I've had pretty significant cash reserves, and so I am considering, given what we've seen the last few days, I'm really hoping that we'll see a bounce back. But if we don't see a bounce back in the next couple of days, I might dial down beta a bit, increase some cash, maybe add to my gold Just ED HARRISON, we'll take a little duration risk with that cash and put it into bonds if the rates are going up.
Speaker 1:MIKE GREEN. Well, I don't have any bonds. Ed HARRISON, don't laugh at my bonds, mike GREEN, I don't have any bonds. Laugh at my bonds. I don't have any bonds, I know. But you could, I could have some bonds, you could take your cash and actually earn something more with it.
Speaker 1:I could, I could take that cash and put it into gold, which is doing well. I don't really think. Well, you have a point. Maybe I should be thinking, you know, as markets become more volatile, maybe I should be thinking more about dividend yield. So you have a good point there. But you know, we'll see.
Speaker 2:I'm just saying, I've looked at hunker down by taking some of my investment in my midcap and my index, because I'm in an IRA. I've just gone to cash with them and now I'm thinking about whether I should take that 20%, I put into cash and put it into some bonds, because I'm going to be here, I think, for more than nine months. So if I'm going to be here for a month of time, it might make sense to, you know, earn 5% instead of 3% and uh, and I, I think that we're, I think, with this, um, you know, there was a good, there was a good line that said, when, the, when, the.
Speaker 2:What was it? When a clown comes to?
Speaker 1:the. That was the line that I discovered, which was an old Turkish proverb. Right, turkish proverb, right, yeah, old Turkish proverb. When a clown enters the palace, he does not become king, he turns the palace into a circus, and I think that's a good description of what we're dealing with right now.
Speaker 2:Right. And all I'd say to add to that is that if you think that the circus doesn't include the Fed, you haven't been paying attention, because the Fed and their ties to the existing government, whether it's for reappointment or whether it's for other resources that they want to obtain, I think the Fed is part of the circus. Now I agree, 100% agree, steve. Okay, if you are idealistically believing that the Fed is an independent entity and is going to do whatever is right, then you haven't been watching the last six months. The Fed cutting 50 basis points in September was an election-motivated cut. They wanted to cut to try to make the markets more stable because they believe that would help Harris. There was no reason for them to cut 50 basis points in September. They were projected to maybe have no cut. So to think that they are not politically motivated, I think is a little bit naive. I'm a little skeptical.
Speaker 1:Yeah, it's like saying you know, the Fed is politically motivated in the same way that the Supreme Court is politically motivated. Correct, they're not supposed to. You know, Roberts would say we call balls and strikes.
Speaker 2:But if you believe, if you believe that the Supreme Court is politically motivated, you don't believe that the Fed is politically motivated, how are you making that transferral realistic If they're both bodies made up of people who were appointed? They're both. I mean, I think you're making my point for me, Clem, You're not making a point against me.
Speaker 1:No, I am making a point for you, oh okay, I thought you disagreed. I'm saying that politics is an important consideration in bodies that are supposed to be neutral and technical. The Fed is not supposed to be responsive to politics, but yet is. The Supreme Court is not supposed to be responsive to politics, and yet is. I think they're analogous situations.
Speaker 2:Correct, and so all I'm saying is it feels to me like they're in a box now that they can't get out of because they don't have enough basis on the real facts and they're used to operating in more political environment and I think that that's going to create, in my mind, more volatility. So I think we're both skeptical of the same things, but maybe not Anything else. On, inflation.
Speaker 1:No, I think we've just about covered it. So everybody, please, you know, please, you know, tune in for some future episodes and you know we're really happy that you, you know, that you listened to us today. Please like us, please send us questions if you have any, and, steve, you know, have a great day, okay, hey, thanks.
Speaker 2:And I also want to say a big thank you to all of our listeners in Scotland and Canada. We've gotten some real big downloads recently and we really appreciate you tuning in and if you have topics you want to email us or ideas, let us know. We love to talk and pretty soon we're going to get our friend from Canada back on, Mr Thorne and some other guests. So have a good day and just remember, keep your head up, Keep looking around. You never know who might be gaining on you.
