Transcript

Hello, and welcome to our market alert video for today, which is June 17, 2022. And the news continues to not be very bright in our view. And I want to go over with that with you right now. First of all, I want to thank you for watching this video and appreciate your loyalty. We continue to see the Dow heading toward 25,000, which would be another 17% drop from here. And the reason why we see that is because we are students of history. And of course, the past does not guarantee the future. But as the old expression goes, if you don’t learn from the past, you are you’re going to be doomed to repeat it. And so, the time in recent memory that we have to look back to where inflation and the situations that we’re in right now, were similar would be 1981, when we had the high inflation that we do right now, and oil prices skyrocketing.

So, if we go back to that time, Paul Volcker was the Federal Reserve chairman at that time. And what he was looking at was inflation as high as it is today, actually not as high, a little bit less. And we think inflation today is not done going up. But also, he had the oil embargo, he had skyrocketing oil prices, prices at the pump were high, and that was the inflation and the situation he was faced with. So, what did he do about it? Well, as you know, we think that inflation is like cancer. And recession is like the flu. So, if I asked you which one of those do you want, you would say neither. But if I said you have to make a choice, you would say I’ll take recession over inflation, I’ll take the flu.

And that was a decision that the Federal Reserve made back in 1981. Paul Volcker raised interest rates to induce a recession to slow down demand and to drive out inflation, to squeeze it out of the economy. Now, what did he do? He raised interest rates all the way to 20%. Now, where are we today at interest rates, we’re at about three and a half percent on the 10-year treasury. So, there’s a huge disconnect right now between the inflation we have today and the interest rates that we have today versus where they were and what was needed to beat inflation back then, that was caused by very similar circumstances, high oil prices, and inflation.

The difference though, today is we have several other complicating factors, of course, one is the war in Ukraine. Ukraine is the breadbasket of the world is what they’re known as. They produce 40% of the world’s wheat supply. Well, they’re offline. Food prices are going up everywhere. And on top of that, you’ve got the problems with a supply chain caused by the pandemic. Paul Volcker didn’t have to deal with a war in Ukraine, or did he have to deal with supply chain issues, and supply chain issues are inflationary by definition. If there’s a short supply of stuff, the prices go way up to buy them. And then on top of that, what Paul Volcker did not have that we have today is the Federal Reserve and a government that over the last three years has pumped $9 trillion into our economy. All right, you know, when you have $9 trillion chasing after a set amount of goods and services, it causes the price to go up. That’s by definition what inflation is.

So, we have a situation now that is far more complex. And we believe far more dangerous than what Paul Volcker had, and he raised interest rates to 20%, and we’re sitting at three and a half. So, what do your think’s going to happen next. What you think the Feds going to have to do to combat this? We think interest rates are going to go up significantly from where they are today. And should that happen, we could have a bear market that could go beyond where it is today. And that’s why we think we could see Dow 25,000. So, my question to you is, what are you doing about that? How are you protecting yourself going forward? And you know, I’ve had people say, is it too late to get out now? Well, my answer is too late compared to what? You know, I remember in 2008, we had gotten out or we had told people to sell in November of 2007. So, we were out during the 2008 credit crash, credit card crisis. And the market was going down and down and down. And people were saying, well, is it too late?

Should we get out now or is it too late to get out? And my answer was the same as today. Compared to what? If it goes down another 20%, you’ll be glad you sold today. So, we have our invest and protect strategy, which said to sell in November of ’07, said to sell literally the day before the pandemic was announced. It’s not perfect. Our strategy also predicted bear markets in ‘10, ‘11, ‘15 and ’18, but our view is it’s better safe than sorry. We believe the growth is important certainly, but protection of principle is even more important. So, if you’re going to err, err on the side of protection rather than on the side of losing. So that’s our view.

Now, I would love to be able to help you. And the way we can do that is if you go to our website and you click on meet with an advisor and you visit with one of our retirement planners, no charge or obligation, we will part friends, but protect yourself now. Our view is this is an important time to do that. And we think it’s going to get worse from here and it may take years to recover, and we don’t want that for you. So, thank you for watching this video. We hope you are well. Share this video with your friends, please. We want to help as many people as we can. So again, thank you for watching and we’ll talk soon.