Let's talk about Rick's freakout on CNBC and what it could mean for the future. Specifically, what it could mean for rates in the future because the numbers weren't good. On the surface, when you take into account that last month was downgraded a bit, it really adds into the notion I Don't follow fed dot plots, but we all know that this quarter isn't shaped enough to be necessarily a good quarter. Many are seeing recession I Don't see a way to avoid it? Uh, just to put a face on this, we all see what's going on with interest rates.

you know, 356 in a two year. Just think about this. on March 8th, it closed at 507. The high yield closed.

That was the highest since 2007. now we're at the low Shields since September 10 year and we did the charts. What a month ago? In about five months ago I staked my claim here. Four and a quarter is the high.

It was the high back in October We never came back and challenged those fall levels you remember. Joe we did the Elliott wave count. It was clearly the high yield close. But man, look at how far we.

Fallen There is this really a banking crisis? Joe You know what it is. It's a Fed crisis. It's a rate hiking crisis. It's a crisis built on a crisis we never solved and now we have walk backs, take backs, treasury secretaries changing their mind.

Is it any? Wonder There's all this volatility in the markets. Back to you good point: People are testing they they're I don't even know if they know anything about Deutsche Bank Do they? Rick They're going to test it. they're gonna and they're going to keep testing right? You know? First of all, we test and we don't test for rates on some of the stress tests here. That's crazy.

But listen, listen folks, we all need to take a step back. Okay, how many trillions of dollars of negative? Securities we're hovering through Europe How could anybody be shy I Was shocked that the news wasn't worse three months ago two months ago. Now we're starting to see the realities of it. and listen: I'm not picking on Jay Paul In the Fed, their mission is almost impossible when I do get a little stressed though is when they ask them questions about the government and spending and debt and fiscal dreaming and Magic monetary Theory and he says oh no I don't comment about that.

You seem to have worked with them when the debt was being created. Now they leave us out to dry I thought that was 507. We've been talking about that so we're that's 150 basis point right there. That is that we go 100.

Do we go 150 Too far? You know? I don't know what too far is you know? Another thing we always forget is that the signals for the market were broken long before covet hit. Uh, we had zero interest rate policy for so long Who knew? we became, you know, uh, unable to notice all the Aromas in the room. And I think that those Aromas of debt and the fact that we had abnormal monetary policy. Really, Since the credit crisis each other, there's no way to tell if this is where we're supposed to be with.

rates are not supposed to be. I Think the most interesting trade to watch is that three months of ten, the way it's reinverted because bills have been a lot more solid than two years. Yeah, but we saved the world twice that you could say, the Fed and and uh, you know, if it was a two-week crisis, that's all he had to do. or three-week crisis.

That's all that's all the comeuppance there was for all that extraordinary government help that we had that that doesn't make sense probably. I don't know what it, poor Ten. I'm saying that it portends. maybe inflation comes down.

That would doesn't have to be some disastrous economics and scenario, but maybe our inflation problem comes under control. Let's see if Steve thinks that can we do it that way? Steve So Rick makes this argument that look, we were basically drunk off cheap money for too long long after the global financial crisis. We had zero interest rates and that is the lower bound of a Federal Reserve was zero. So money was cheap and easy even though we were coming out of the great financial crisis where dead people were getting loans for homes and lending standards tightened substantially coming out of the Great Financial Crisis.

Basically, what you said is poor people can no longer get loans, but rich people can get really cheap loans. That's basically what you did coming out of the Financial crisis because you led to a substantially more stringent Uh requirements for Lending which ended up increasing the requirements to be able to get home loans, bank loans, business loans, lines of credit, credit cards, car loans, do you name it and that enabled a 10-year run of people with access to cheap Capital becoming wildly wealthy whether that was through investing in stocks or investing in real estate, which is substantially easier way to do it in my opinion. For example, had I put my first eighteen thousand dollars with Lauren into the S P 500, we would have turned it into sixty Four thousand dollars. Uh, by right by around Covet.

So let's just say the end of 2019. So S P 500 for about 11 years, 10 11 years would have turned into about, uh, eight to sixty Four thousand dollars by the beginning of Covet end of 2019, we'll call it. Instead, we put that money into real estate, leverage that real estate with cheap money, and took advantage of the beautiful type of financing that we were able to get. After the Great Financial Crisis and what happened, we turned that sixty four thousand dollars into over 275 000.

Well, that 18 000 into over two hundred seventy five thousand dollars. So substantially more than what we could have gotten. Certainly with with without risk exposure, right? There's no risk exposure in real estate when you can rent out a property for more than what your payment was. Then, because rates were so freaking low and and prices were so low, then you had no risk.

Basically, whereas in stocks you go on margin, you have massive risk. All it takes is a quick flash crash and you're out. So Rick's argument here is that we were drunk on cheap money for the last decade and that now the Federal Reserve is basically saying look, when you guys need to print money, we'll print as much money as you need. When Congress wanted as much money as possible to print 4 Covid will print it for you.

In fact, you know it's actually really funny to think about. uh, I did this Uh, and in hindsight, it's like so weird. but uh, I did this Uh, and then I want to talk specifically about going forward. Uh, what we think might happen with rates again long term? uh I I really think it's It's uh, worth discussing a little bit.

but uh, before we do that I want to show you uh uh, this idea because it's it's spawned by what Rick Santali just said he said look Jerome Powell gave no pushback to this idea that hey, look, you know maybe we shouldn't be printing all this money. No pushback from Jpow when it was time to print money, No pushback when it was time to uh, tighten uh and now you don't want to be real with us about how much you really, uh, have to tighten down, how much you're basically walking the economy into a recession, right? Uh, So what I'd like to do is quickly share this particular tab here. let's share this and take a take a listen to this. You should be able to hear this so let me know if there's a problem with the audio.

But look at this this was you could look at this. Free money Jerome Powell's Halloween And what we did is uh we basically did a Halloween as I dressed up as Jerome Powell and my father-in-law dressed up as Janet Yellen and uh, we we literally gave money away in along with candy. We gave two dollar bills away to people along with candy. uh and then of course we made it rain money as well because well, the money printer was on right Is my son Jack? Uh but anyway, what was funny and I'm just thinking about it in hindsight now is uh, let me go to the transcript so we can get it quickly here.

a print because I Print money. Where is it the money we've printed? uh French breakfast. Ah yes. Okay here here we go.

Let's listen to just this segment really quick. Come on. All right. come on.

So far, we've given away about 80 percent of the money that we've printed. Janet's Uh, we might have to go back to the printer and print more. If so, we will do so. Excellent.

Do you think we'll get the authorization from Congress Of course. Nancy Pelosia. Let us print more, Of course, go by and let us spend more. Yes, we'll be able to print more.

Like looking back to this, it's just like, of course, like of course the writing was on the wall. like they'll just print more. You need more money, We'll just print more. And and that's really Rick Santelli's frustration here is that there was no constraint on on how much we were able to print and now we are having to pay for that.

And the question is, is it really possible? Uh, as as uh, you know the other CNBC anchors mentioned that we could just go through a little short period of pain and then all of the money printing that we did and the pain we had to go through basically pays for that inflation in a very short period of time. Maybe And that's the question. See, if you're wondering about recession, you have to ask yourself this. We were talking about this yesterday.

Uh, the team and I I asked look, if a normal recession is a decline in GDP of half of a percent to maybe negative two percent if that's a normal recession, right? Let me ask you this: How bad would a recession be if GDP contracted 10 percent? Really bad, right? That's the assumption. But wait a minute. You have to ask the question correctly. How long? Let me ask you this: Could you get through a 10 contraction in GDP a massive recession for a month? Probably You'll just spend through it.

Okay, could you get through it for three months? Probably just spend through it. Could you get through it for a year? Probably not. 10 contraction would be devastating. The amount of job loss would be insane.

Now, where are we today? Well, we're not going to face a 10 GDP contraction, but the question is, how long does the recession last Because it's almost a foregone conclusion now that the recession is going to happen. Jerome Powell's recession indicator is flashing massively red and it's basically screaming at us saying we are going into a deep dark recession and that indicator is actually right here on screen now. Powell's curve says recession is confirmed. gap between current and future short-term rates signals steep Cuts coming in interest rates and a massive Uh inversion here of the yield curve.

This yield curve inversion we have not seen since the.com recession. Now, this inversion is the difference between the three month treasury yield which is around 4.5 ish right now and the Uh a 10-year treasury yield which is around 3.3 That means people are demanding a higher yield on their money today than they are for the next 10 years. That's because we think inflation is going to remain hot for the next, you know, certainly at least three months, but potentially even more so people are demanding more of a premium. And that's why you have this inversion of the yield curve.

Now, the only way you can explain away well, there are two ways you can explain a weighted version of the yield curve. One you can say, well, that's reasonable if inflation goes down. Of course, people are going to expect a higher rate today because they have to get through this period of inflation. so they'll expect a higher rate now and then a lower rate in the future.

That's why the yield curve is inverted because there's High inflation. We didn't have high inflation in 2000. the problem with that thesis is pretty much every time the 310 has inverted in the past, it's led to a recession within the next 18 months. and so now the question becomes, how long is that recession going to be and how much pain are we going to suffer? Well, let me tell you my base case and then, uh, let's go to the worst case scenario.

So base case scenario is that we have a massive amount of disinflation that comes from Housing Services this summer that combines with goods disinflation and the start of services X housing disinflation. That's like labor hotels Hospitality Whatever. And come July August September We start having potentially even negative prints of inflation and month-over-month prints. Those would be year-over-year likely negative, but month over month rents hopefully close to zero.

Point one point two percent acceptable. As long as we have that sort of disinflation this summer. Again, point one point, two percent on the month over month. Acceptable.

Then the recession will probably come. We will probably go into recession, but the recession might be short-lived and short-lived is very important, so inflation goes away. Come June July We cut rates like crazy as we saw from CNBC The rate cut curve. As you can see on screen here, the rate cut curve is substantial.

We expect to be uh, one percent lower on rates by the end of the year. So massive rate Cuts Being priced in. starting this summer, and what happens? Well, you end up having a shallow, maybe two-quarter recession. You cut rates substantially, You turn the money printer back on, and everything goes back to normal.

In the meantime, people who lose their jobs or have revenues decline. what do you do you spend through the recession and the stocks that will do the best in a spend through type of recession in my opinion are going to be people and and or who spend money on on expensive items uh and uh, and high quality brands that have pricing power In a shallow recession? That's my base case. and I'm putting my money where my mouth is now every time. I Flip-flop I Send alerts and I talk to specifically First Course members about all of that.

Uh, which. Now it's worth noting if you want to join the courses, you can actually sign up using Buy Now Pay Later. You can sign up for the courses. Uh, sign up for as low as 48 bucks a month here with a firm and you can Buy Now Pay Later for the courses on Building Your Wealth now.

Uh, check those out linked down below. We've extended that coupon code that expired Wednesday was supposed to expire Wednesday just for today, so you could use that Buy Now, Pay Later service if you're so inclined to do so, but you'll get lifetime access the same. Even if you use a Buy Now Pay Later service. you will get lifetime access to the programs of Building Your wealth, which is pretty cool.

So check those out linked down below. Uh, most popular bundle right now is the Zero to Millionaire Real Estate Investing and the Songs and Psychology of Money Though more people, more and more now are starting to Triple bundle with the Elite Hustlers because they want those weekend live streams as well. So check that out. uh, via the linky down below and you can Now Buy Now Pay Later for those programs on Building Your Wealth which is pretty cool.

So again, check that out. There's Clarna. Uh, there's a firm. There are plenty of different options that you can now use linked down below.

But anyway, that's the base case scenario. What's the worst case scenario? Uh, which? I Diligently research myself with my team on a daily basis to find. okay, how exposed are we to a potential worst case scenario? Well, the worst case scenario is problematic. The worst case scenario, unfortunately, is a situation where we have a longer recession.

That is, inflation stays sticky. If inflation stays sticky, you probably don't want to be invested in the stock market because even pricing power stocks will suffer them. If the recession ends up lasting throughout not only the second half of this year, but all throughout 2024, pricing, Power stocks will suffer. You will not want to be in margin going into 2024..

Uh, the start of the recession might not actually Mark the bottom of the stock market because the earnings pain that comes could be very bad. So in the scenario of sticky inflation, we would actually not have rate Cuts We would. Uh, because remember what the Bond market is pricing in Right now the Bond market is telling you rate cuts are coming. The Federal Reserve is saying rate cuts are not coming.

So why is there such a difference between what the FED thinks and what the market thinks? Well, it's It's for two reasons. Number one: the Bond market is looking at leading indicators of inflation and is suggesting that rates are going to get cut. The FED is playing a two-folded game. One, they're playing the game for the worst case scenario.

The worst case scenario: we have to keep rates high for longer or even raise them more. which means longer, deeper recession. But also, if they admit that we have to cut this year, then they might actually undo the progress they're making on tightening Because if the FED comes out and says yeah, we'll probably cut by one percent. By the end of the year, they're admitting to a recession.

They're admitting to turning the money printer back on and people go spend willy-nilly Again, stocks will go to the Moon. That's what they don't want to happen. They don't want Financial conditions to ease, so they have to put the hard face on. for the worst case scenario.

They basically have to lie to us for the worst case scenario to minimize the worst case scenario and to make sure the best case scenario actually occurs. And then of course I mean the best case scenario is inflation's gone tomorrow. but uh, you know, then everything goes back to normal. Then you might not even have a recession.

Base case scenario is shallow recession. Worst case scenario is deep Long recession. So so that's really what the Market's dealing with right now. Now, where do we think rates could go in the long long term? Well, personally, I think in the long long term? there's actually a possibility actually High likely that we're probably going to go back to zero the zero lower bound within the next four years.

I think by 2028, 7 will probably be back at zero percent interest by the end of the decade. We'll certainly be back at zero percent interest and before 2020 2040, we'll probably be looking at so God 20, 40, 17. you know I'll be I'll be older anyway. Uh, but anyway, by 2040, we will probably be at negative interest rates.

That's my thesis and not deeply negative, but we will probably be at negative a quarter negative a half percent in interest rates. Yeah, you will get punished for saving you. Think you're making four percent now on treasuries is gonna last. That ain't gonna last.

It's gonna go negative again. and that's going to be because of the acceleration of deflation thanks to autonomy. And AI Now there was actually a funny quote in the stock. Uh, on Twitter Yesterday it was a Goldman Sachs quote that somebody posted on Twitter and the argument was the bond market is pricing in a recession.

The equity Market is pricing in artificial intelligence. Part of that is because of Nvidia's skyrocketing which I believe is actually pricing Power saw I bought a lot of Nvidia uh in the mid 100s. exposed myself to a lot of that, but uh, you know it's it's getting a little frothy over here. 270s.

it's a little expensive out of some of the other options that there are still not as expensive as a TSM and apple though. but uh, you know it's getting. Let's get, let me get up there. But anyway, is is it possible that we were just drunk on cheap money the last 10 years? Yes, that's possible.

Or the great moderation is real. And this 40-year downtrend of inflation and this thousand year long downtrend of mature economy is seeing declining rates? Uh, neutral rates of Interest Which means declining interest rates. Is it possible that we'll return and that all this coveted transitory inflation of money printing will just end up being trans story? Yeah, that is possible. that's very possible now.

transitory will end up probably having been 21, 2, 3, 4. Be like a three or four years of trans story. But you know when we zoom out on sort of the macro, it'll end up being a sort of a blip transitory. But potentially if the base case holds true, if we go back to the Peter Schiffian style uh, long-term inflation, then eventually the the dollar will collapse.

Which I Do think that at some point the dollar will collapse I think that point is still hundreds of years away? Uh Peter Schiff thinks it's you know, months away? Uh, or potentially a few years away. So I think then it just depends on on your thesis. But but my take is base case inflation goes down. You want to be invested because of a potential Nike Swoosh style recovery Where yes, we have a lot of volatility fears of these banking crises.

Deutsche Bank Credit Suisse Uh, you know, who's an ex? What else? What's the next shoe to fall and drop? Uh, all wall drone piles still hiking and credit conditions are tightening which will lead to a deeper recession I Think that Nike Swoosh recovery holds in the base case if inflation stays sticky for too long, we don't get that disinflation we're expecting the summer we're screwed. And the base case Goes to Hell So anyway, uh yeah, so there you have it. uh of uh of my thesis and response to Rick Santali.