WARNING: WHAT IF Q2 is Also a Negative GDP Print? Will Fed Reverse Course and Start Cutting FAST?

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good morning good afternoon

good evening folks michael zuber one

rental at a time back with taylor from

life goals investments and if you

watched episode one we closed with a

cliffhanger

uh why don’t you go ahead taylor and

tease him with how we’re gonna start

episode two

this is my question to you so i’m going

to throw it back at you i’ll take a

swing if you want but i’ll let you

answer first so i said what happens we

just came off of q1

showing a negative gdp print which is

the economic report card if you get two

negative gdp prints in a row that’s a

recession

the fed is obviously raising rates right

now to curb these ridiculously obnoxious

inflation that we’re in yeah so

inflation’s still here what happens what

does the fed do if next quarter the gdp

print shows negative

uh so a couple of things so i’ve dug

into the number because it was so

shocking it was very much an accounting

101 issue i see

less than a five percent chance we get a

repeat of a shocking negative number so

a recession by the classic metric will

be

uh not occurred but i think the question

is worth talking about because it was

such a shock

it is uh well first off the fed’s not

going to slow down especially if the

internals say the consumer is still

spending we had record imports in q1

that stuff goes somewhere and it means

the consumer is spending i as you know

believe the consumer is not nearly as

weak and i actually think the consumer

is getting weaker week by week

consumers are now saying can i live

without it

they’re not sacrificing to save money

they’re deciding do i buy this or do i

buy that because i’ve only got one

dollar or a hundred or whatever so i

think we are in for a bad mix i think

this i think again i go back to my

whiteboard discussion of 2022 and 2023

nothing has maybe changed my mind this

year will go down to stagflation

high inflation below trend growth and

historically speaking below trade growth

has been you know sub two percent sub

one

i’m going to call it stagflation even if

we have two negative gdps and we still

have

five six seven eight percent inflation

we are in stagflation we have

too much money chasing too few goods

and

it needs to stop i think the fed

i think i think powell said it thursday

or was it two thursdays ago

i don’t care about the stock market

he didn’t say that exactly but he

basically said no he did you you’re

right yeah he said i don’t care

i don’t care that not my he’s basically

like not my problem i’ve got to fix gas

in food and you know rent and all these

other things because we’re losing the

bottom tier of our sus you know our

economy and um correct i think he’s

right i i it’s crazy taylor

so i’m a landlord i got lots of units

and i’ve had more tenants ask for help

in the last 60 days

than i had during the depth of the

pandemic

that’s not a good sign

that’s not a good sign that’s telling

wow i i that’s the first you mentioned

that that’s shocking to me yeah it is

not good what is going on at that rung

and again

it’s

it’s a problem it’s happening everywhere

i talk to landlords i communicate with

landlords on my channel a lot of people

right another guy on the east coast uh

nearly 200 units he’s like

i don’t know what happened in the last

30 days but i had five requests for help

and he had five requests

the whole year of 2020 right ouch so

inflation is really binding so the the

short answer is let’s assume it’s

another negative print it does not give

the permission for the fed to stop it

doesn’t i know everybody wants it but it

ain’t coming

yeah yeah i i i so i’ll say this i don’t

so i’m actually thinking that we’ve hit

peak inflation so i do think sure

inflation has been touched and it’s

going to roll back over but i saw some

shocking stats this weekend

as to how much

um well let me just walk you through

them so the case-shiller index is the

way that

you know obviously the housing market is

is measured so the case-shiller index

was up 20.2 which means the average

house in the us is up 20.2

year-over-year for the month of february

that’s higher than the 19.2

that they saw in january so it doesn’t

seem that the housing market is slowing

down and the scary part about that is

is that rents and you might be able to

speak to this firsthand but the article

read that rents generally trail housing

prices by 12 to 18 months

so if home prices are still going up

that’s going to trickle down a year

later into rentals and shelter

is one-third one-third of cpi and yeah

or cpi when they strip out two other

pieces it becomes 40 percent yeah and so

inflation and shelter is a big piece of

that inflation that’s going to drive

numbers here so go ahead i want to hear

your take on that yeah so a couple of

things so first off cpi that’s the

number we’re talking about rolling over

i think you’re right 8.5 will be the

high print of this cycle

uh but that’s only because of how the

math works right our base effect right

we’re basically rolling off the last low

month

inserting a higher month so it’s it’s

it’s not right we’re gonna go from eight

and a half to seven eight seven nine

eight

it still sucks

it still sucks it still still it still

sucks we still feel for everybody

including ourselves we don’t like oh

yeah

dude when my wife olivia actually

comments on a receipt that’s like that

costs what let me just tell you

hold on inflation is real that’s a

problem

she hasn’t looked at a price tag in a

decade

jesus yeah so anyways uh so the other

thing is i have corrected cpi

uh the last six months or so because

uh it’s just

it’s an error in judgment right they use

owner’s equivalent rent as you know

and cpi which is a stupid survey of a

hundred owners on what you would rent

for so again it’s a really easy fix

i’ve stripped because again it’s a it’s

a formula right you strip out the 33

which they say i think last reading uh

owner’s equivalent rent was like five

percent so you strip that out and then

you go back to case shiller or you go

back to property radar or any of these

others and you hear rents 14.1 you

insert that our last cpi reading wasn’t

eight and a half it was eleven two

ouch don’t do it to us michael eleven

two just tell us the facts that’s brutal

eleven two so

yeah have fun with that so inflation is

a problem

um so

so so i’ll say this too so when when

talking about just going back to that

original question of what does the fed

do

i actually have a different take on that

because i think that if you have

gdp go negative again which again we’re

putting low probability yeah i have a

higher probability than you do you have

five percent i have more like 10 to 12

somewhere in that ballpark but if that

takes place i don’t think the fed can

move

the fed’s stuck totally disagree

so so what i’m saying is that and what

i’ve been saying this entire time is

that the fed is not going to be able to

be as aggressive as you think they are

because i think they’re going to break

the economy quicker and now granted

don’t anticipate yeah so

where in the

fed’s charter

does gdp show up

isn’t it

stable prices in full employment

i don’t i don’t remember where gdp was

in there

yes but but draw a line that isn’t a

straight line between full employment

and gdp i think that’s a tough i think

that’s a tough thing to not draw a

direct line between we’re at 3.6

and i’m gonna guess go lower on friday

not happening

yeah i i okay then productivity is

really really really good if

unemployment continues to come down and

gdp continues to be negative people are

incredibly incredibly productive more

productive than they have ever been in

the history of the country which could

be but but i get where you’re what

you’re saying there it’s a second

derivative of it yes but it’s right

there yeah i i i would i would yeah i

would i mean it would certainly not be a

fun i mean i would not i don’t want to

be in the fed today being a being a fed

member in an environment where you’ve

had two statistical quarters of negative

gdp and you have seven percent cpi i

wouldn’t want that job it wouldn’t be an

easy call it cannot happen right it

seems like it can’t happen with with

unemployment where it is with but this

so what happened with that caused the

imports to be so high that won’t happen

again likely is the fact that

inventory needed to be built out so

inventory and bottlenecks are what

caused the uh the the the the um

import number to be so high because

companies had to build out their

inventory which had been depleted due to

all the bottlenecks of covet now that’s

been chewed through so that accounting

error or not accounting error counting

whatever you want to call it is not

going to be an excuse to be around next

time and it won’t be the same so we’ll

see how it plays out but the export side

of things is concerning as well because

that’s showing slowing global growth

well dude we’re gonna have a worldwide

recession we’re gonna have a world the

imf just just caught

their gdp projections for the year they

cut it by more than half a percent and

it’s like

okay

we’ll see this this economic stew is is

churning right now yeah so to wrap up

episode two i don’t think again i gave

it a one in 20 which is five percent

chance that we have a negative because

again

i think the oddities the one-off

oddities that made up the negative

number wow legit is not isn’t likely not

going to repeat

um fair

and uh even if it did happen i don’t

think the fed has a choice when i when

they look at 1a and 1b

i don’t think it really says negative

gdp is a problem right and again dude

they’re at a quarter

by next week you know they’ll be at 75

basis points what the hell are you gonna

do you know they’re yeah

yeah they’re they’re at what are they at

now they’re at f so zero to 25 now it’s

25 to 50 right so yeah next week they’ll

be at you know another 50 basis points

higher yeah it’s just it’s just not

going to happen well this is a lot of

fun but

let me let me just say one thing in my

defense of of you

of that thought is that sure we have two

to three meetings between now and when

that next well that’s very true we’ll be

out so it’ll be 150 basis points higher

because it’ll be likely 350 basis point

moves from there so then all of a sudden

you’re at 175 to 2. that’s fair but

but and and if you remember actually now

we cycle back to our original

conversations that’s about where i said

they would be at the end of the year

yeah i thought it would be multiple more

25 basis point moves and they would get

on their horse a little sooner than they

did but they waited and now it’s got to

be 50s to get us there 50s yeah yeah you

called for two i called for three

so yeah and

you look to be you look to be actually

smack dab directly in the middle of what

the market expectations are at this

point yeah and i called it weeks ago

just i’m just yeah you called it way

before that that bounce you’re right

full credit you you called it when it

was probably more like you know two and

a half something like that yeah yeah so

this is a lot of fun

yes well i’ll take the win now because

it may go away soon

oh taylor how could people find you

yep

follow us um

life goal on instagram again i’m sorry

at life goal investments on instagram

life goal investments thanks buddy i

appreciate it thanks michael uh-huh

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