Jim Welsh: Debts and Deficts Surge As Fed & Fiscal Policies Fail

Tom welcomes back, Jim Welsh, founder and publisher of Macro Tides. Jim shares his perspectives and charts on the current state of the market. He discusses potential coming economic challenges and is concerned about the markets focus solely on CPI metrics. Note: For those interested in Jim's offerings he provides a special offer for his subscription in the guest links section below. One of the major concerns discussed was a significant increase in inflation recently. This prompted the Federal Reserve to respond by increasing the funds rate. However, Welsh cautioned that people should not disregard Fed policy of the 1970s, as they could influence future actions by the Fed. Welsh believes that the cause of the recent inflation surge is related to consumers entering the post-pandemic period with substantial savings, leading to rising wages over the past few years, which are now manifesting in higher consumer prices. Banks have tightened lending standards, making borrowing costlier for small businesses, while credit lines decline, indicating signs of strain. Although the GDP grew significantly in the third quarter, there are cautionary indications not dis-similar to those preceding the 2008 crisis. Jim stresses the importance of analyzing multiple factors to evaluate economic activity accurately. He notes that corporate bankruptcies have reached record highs, hinting at hidden issues despite seemingly positive growth. Moreover, it takes time for macro-level changes to impact behavior, leading to questions about the true significance of GDP as an indicator of real economic growth. Welsh's outlook is that the economy will likely slow down over the next six to nine months. The Federal Reserve aims to handle the situation cautiously, learning from the mistakes of the 1970s. He highlights the potential for financial markets to misjudge or discount the future, creating investment opportunities. Lastly, Jim discusses why the current U.S. political system is not up to the task and will remain polarized for some time. Talking Points From This Week's Episode * Economy may enter a new 'lost decade' as economic growth wanes and market risk a further downturn. * The Fed's approach may resemble that of the 1970s. * Increasing political polarization may lead to economic downturn, making it difficult to pass fiscal and monetary policy that is beneficial. Time Stamp References:0:00 - Introduction0:51 - CPI Numbers & Markets3:43 - Lag Times & Fed Policy9:05 - Rates & Mechanisms13:15 - Growth Vs. Prices14:48 - Past Monetary Policy19:53 - Fed Targets & Rate Cut24:43 - Secular Bull & Bear Mkts29:26 - Bonds/Yield Curve Charts32:10 - Economic Indicator Chart33:12 - Faster Hikes & Lending35:35 - TLT ETF Trend Chart38:32 - 2024 Dollar Decline42:12 - Gold A New Bull Market45:13 - S&P & US Bond Chart47:23 - Tech Stock Outlook49:56 - Secular Bear Market51:05 - Stock Mkt. Valuations53:56 - Fiscal Spending Power56:40 - Fed's Balance Sheet57:57 - Political Polarization1:01:57 - Wrap Up Guest Links/Jim's PromoWebsite: https://macrotides.com/Twitter: https://twitter.com/JimWelshMacroE-Mail - Offer: [email protected] Jim's Special Offer: Promo Code "GOLD"Jim says, "I want to offer your viewers a 50% discount off their first month", so those interested can check his work out. This discount applies to monthly subscriptions to the "Weekly Technical Review". This is normally $35.00 so it would be $17.50. The promotion code is: GOLD Jim Welsh is a student of the financial markets and a seasoned veteran of investing with forty years of po...