Video Closed Captioning:
good morning good afternoon good evening
folks michael’s uber one red cell at a
time it is a holiday but not for us it’s
every day saturday except on monday and
this is mr greg dickerson how you doing
sir doing great michael good to see you
nice to see you as well so something you
have uh champion brought to the channel
probably
three four five months ago was this
notion of great deleveraging i want to
kind of break that down and ask you
specific stuff about what is going on in
our economy right now what is going on
in the fed and you know talk talk about
the future a little bit you ready
i’m ready let’s do it awesome so
what do you think is the if we talk
about inflation right if inflation is
the topic right it’s the middle of
january do you think the fed is clearly
behind the curve as we sit today
yeah yeah they’re way in over their
heads um you know they were ignoring it
and denying it for
way too long they’ve lost credibility
from a policy standpoint
meaning the rest of the world has no
faith that the fed can make the right
decisions to st you know to fight
inflation which is now a global thing
this is really fed policy in the united
states is affecting
markets and and you know economies
around the world so they’ve lost
credibility around the world that they
understand and have a grip on what’s
going on
what the rest of the world knows that
the fed is not acknowledged yet is yeah
they said we’re gonna raise rates four
times next year we’re gonna you know uh
lighten up on the balance sheet and you
know we’re gonna um you know stop the
you know asset purchase and
you know liquidity flow
and
you know what the rest of the world
knows and what most people know is it’s
too late unless they act drastically up
front inflation is so out of control now
and it’s going to continue to get worse
there’s some transitory components but
the end of the day
it’s bad it’s you know we’re double
digits you know probably close to 20
real inflation yeah you know what what
they’re measuring they know doesn’t
accurately account for what we’re really
experiencing and everybody watching this
knows and what’s happening is you’re
getting to the point with inflation
where you’re going to have civil unrest
that’s when you have a serious problem
from a political standpoint when you
have people marching in the streets and
showing up in washington because they
can’t afford food they can’t afford
shelter and they can’t afford clothing
the feds got to move and they got to
move fast so what does that mean paul
volcker alan greenspan so the only way
to stop inflation at this point where
we’re at now everybody knows it is you
got to put the the u.s economy into
recession that’s the only way to stop it
oh you are you pre you’re you’re reading
my notes
so the next question we’re still going
to walk through this so we can get to
the i think we’re in the same place
absolutely so again i agree with
everything you’ve just said so the next
question i have is can the fed catch up
well
yeah they can but will they that’s the
that’s the next question can they but
yeah they can so if the fed came out and
just right off the bat
stopped all asset purchases and raise
rates at least a half a point if not
three quarters and that’s what they have
to do not this 25 or exactly
you got to come out and you got to swing
a sledgehammer and you got to raise
rates you know
500 basis points you know to 750 basis
points you know which is half a percent
to three-quarters of a percent sounds
like a lot yeah and cut everything else
out at the same time and then let the
chips fall where they fall and let the
markets deleverage let everything come
back to home base and then you can you
know let things kind of stave off from
there but i don’t think they have
um i don’t i just don’t think they have
the backbone or the stomach yeah no i uh
so so far we are in painful agreement
can they absolutely and i’ve actually
said it for months now on my channel
that the first move has to be half a
point if the first caveat is as you’ve
seen i’ve sent you a couple articles the
politicians have exited their positions
yes and so if they’re you know
institutional investor buddies so yeah
they can now now they
could before because they had to get
everybody out of the market first and
you know and i’m not kidding if you look
at the stories out there every day
there’s a new story coming out about one
of the politicians in washington
congress senate you know in in dc
that have been taking advantage of fed
policy and insider information to really
do well in the stock market that’s the
other thing that’s causing a lot of
civil unrest right now the more these
stories that come out the more people
are getting ticked off
so they they have to do something now at
this point yeah i’m i totally agree with
you the only way this gets better again
can they is jerome powell has to be a
mini paul voker
he can’t be green scan can’t be bernanke
can’t be yelling keppy can’t be the one
that hey the market throws a fit and
then you stop or heaven forsake reverse
you’ve you’ve got to be able to suffer
pain and you’ve got to probably kick
this thing into a recession so
can they catch up yes can they build
confidence yes so the next question is
will they
what do you think you know
at this point
it’s a political issue and you know you
have midterm elections and you have the
presidency coming up so unless they do
something
drastically that they can you know so
the only thing they can do is put the
country in recession create a serious
economic situation to get inflation
under control which is which is going to
hurt you know people in another way
because you’re going to see real estate
values
stocks because you know all of that’s
going to unwind so that’s going to hurt
the wealth of people
which which hurts spending but if you
leave inflation where it’s at that’s
even worse see really it’s a no-win
situation unless you let it get really
bad and then right before the election
you jump back in and save everything and
you know yeah all the markets and
everything is back off to the races and
you know the current policy current
administration looks really good because
hey we were headed into economic
armageddon and we just saved the world
so
they’re taught having these
conversations behind the scene let’s
nuke it now so we can revive it later
they have to do something they can’t
just ignore it because
again you will have people marching in
the streets if this goes on much longer
yeah this this is uh 2022 is going to be
a very um
interesting year and i think back to
kind of the earlier conversations one
you mentioned in the grand video it
could get to a point where high in real
estate doesn’t sell i mean they become
this the notion of a white elephant
remember that oh white elephant you
can’t nobody can sell these arbitrage
you know beachfront homes
because they’re just not trading because
nobody wants them so i mean yeah and
there you know there’s there’s a certain
level of ultra luxury real estate where
you know people just don’t care they pay
what they pay
but when the economy is bad and when
it’s risk off again don’t fight the fed
works both ways it works going up and
we’re coming down so when the fed is
coming out with guns blazing you can’t
fight the fed what does that mean you
take on risk assets because they’re
you know they’re the they’re the 800
pound gorilla buying bonds and so all
that
well when it goes the other way and the
fed’s unloading and they’re not pumping
liquidity in the market then you know
you can’t fight the fed that way either
so what happens is and we saw it in 2009
the first segment of the market that
took a hit back then was was all the
luxury stuff all the high-end
restaurants all the high-end hotels all
the high-end vacation spots all the
high-end houses they all came back it
was a long time before the luxury real
estate market did well the last you know
couple of years it’s done exceptionally
well because interest rates are really
low and at a certain level you have
people that are paying cash they don’t
care but still the luxury real estate
market
was suffering for a long time and it it
really came back
uh you know and backed up quite a bit
over the last number of years in the
last two years it’s kind of picked up a
little bit but that’ll be the first
sign you know we talked about it before
you’ll see it in second home markets and
you’ll see it luxury real estate that’s
your first sign that the real estate
market’s turning yeah i agree
so what so when you think about where
we’re at what what do you think will be
a bigger policy mistake because clearly
we both agree they’re late they let this
thing go to on transitory was perhaps
the worst call ever
uh or will there
i just
i do think he’s going to come out hard
i’m still calling half a point high
because this 25 point basis point is
going to be nothing um do you think he’s
going to be able to hold on or do you
think he’s going to relent i guess as
you’re saying right come october they’re
going to come back and say oh it’s all
good blah blah blah
and they’ll cut rates yeah i don’t i
don’t know and a lot of it’s going to
depend on you know all of the
you know cpi reads and employment and
all that i mean so far he still
has been pretty soft even with them
coming out saying we’re going to reduce
the balance sheet we’re going to stop
uh you know the taper we’re gonna unwind
that um and we’re you know we’re gonna
start tapering the the asset purchase
and and we’re gonna raise rates it’s
still mild yeah you know hey you know
what i mean they’re still buying how
many hundreds of billions a month and
he’s only they haven’t even stopped yeah
they’re still they got a 9 trillion
dollar balance sheet and they’re still
buying for a couple more months it’s
crazy yeah and we’re going to raise it
25 basis point i mean it’s still weak
it’s still very weak and again that’s
why they’ve lost credibility because
people are going you still don’t get it
yeah so they have to come out very
strong with guns blazing or yeah they’re
going to go down as the worst
federal reserve board of all time i
agree and you know worse than anybody in
the history of the united states and the
damage that they’re doing
now and the damage that’s going to be
done to unwind it
yeah the damage to unwinded is going to
i it’s
we i think i read a quote or heard it i
don’t know if i read it or heard it
basically if we don’t if we keep kicking
down kicking the can down the road uh
the pain that we’re going to feel now
will be paid with interest
which is a scary thought uh the biggest
thing for me that i think is going to be
that that is not being appreciated is
not the stopping of the taper or yeah
the getting done it’s not even raising
rates to me the big thing greg is
they’re going to become the biggest
seller of treasuries not the biggest
buyer i don’t think people have
appreciated because again bonds are
inversely correlated the fed doesn’t
have to make money
so if the fed sells a bond and either
they’re unloading a hundred billion no
there’s no buyers what do you do well
you raise the rate are there any buyers
nope raise the rate
you know eventually anything
we could see some really fast movement
in rates i fear what do you think again
that’s what i mean don’t fight the fed
so what happens is that they start
selling they start you know unwinding
the balance sheet
rates go up
that’s where you’re you know that’s
where your money goes to now and where
where would the money have otherwise
gone into risk assets yeah now they’re
going into treasuries and we’re already
seeing it you know the ten years you
know almost to two percent yes i think
it was one eight or 179 as soon as you
cross two percent again you know then
you know eyebrows start to get raised
and things like that but
you know i mean you know it’s it’s over
my head in terms of you know what what
if they don’t do anything how far can it
go and how bad can it get and you know
some of the inflation is pandemic you
know
related in terms of supply chain things
like that
and we were doing fine until the
pandemic and we experienced that little
disruption
but assets were a different story so the
question is how far and how long could
you keep pushing you know inflation and
assets without real inflation in the
consumer
you know index which you and i talked
about for a long time we saw
hyperinflation in the at the asset level
and you know hyperinflation is a big
term but when you look at markets man
it’s parabolic over the last year you
know from when the fed threw that
trillion dollars at it yeah real estate
you know not quite as much as the
markets but it’s it has a big up curve
you know with 30 40 over the last couple
of years
but we still weren’t seeing
real inflation at the consumer level
that was impactful until the pandemic so
some of that’s going to be transitory so
you know if it starts to come back into
check once
you know we get through this and get all
the
you know
supply chain issues resolved and you
know kind of ease the demand a little
bit
um you know it’ll just be interesting i
just don’t know how far you can go if
you don’t have real consumer inflation
but you keep pumping up the assets i
don’t know how far that can go no it’s
it’s it’s time to pay up i i really do
think that again we’re the fed has a
meeting i think uh the 27th 26th 27th so
uh first meeting of the year this isn’t
you know doom and gloom this is no not
at all and this and that the other it’s
just deleveraging so you know you have
to de-leverage every so often and
markets you know they pull back and they
go up and they pull back and you know we
just went too far too fast and now we
have to unwind that a little bit there’s
only two ways to do it number one from
from an economic standpoint you tax you
know liquidity out of the market right
that’s one way the other way is
you know you start selling off you know
stuff and you raise interest rates and
things like that you cause a recession
so you know that that reduces demand
right what is the recession so that’s
you know drop in growth you reduce
consumer demand so prices you know
should come down the less demand for
something the better the prices are
going to be so that’s their real issue
is that there’s still too much demand
not enough supply so that’s the issue
there that could unwind potentially you
know that
you know with powell as as interesting
as his thought process has been she just
don’t know what he’s going to do it’s
going to be interesting so again folks
we’ve been talking about the great
deleveraging give full credit to mr greg
dickerson for calling that he has his
own playlist on this channel with a
hundred hours material go check it out
but if you want to find him how would
you like to do that greg yeah greg
dickerson.com that’s where on my youtube
channel podcast info lives greatnick
greggdickerson.com thanks buddy