The Fed Is Late Will They Create a Market Accident? Will we have a Recession? How Much Pain in 2022

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

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