Executive Summary
In this episode, I dive into some pressing financial topics with Paul Kiker from Kiker Wealth Management. We explore the Federal Reserve’s recent rate hike and QT decisions, the concept of Elon’s “magic money machines,” and the leading indicators that a recession has arrived. We also touch on the intriguing dynamics of the stock market and the role of gold in today’s economy. It’s a packed discussion with insights that could impact your financial outlook and portfolio decisions.
The Federal Reserve’s Hawkish Stance
The Fed recently announced they are holding rates steady, but with a more hawkish outlook for the future. They predict a higher interest rate for 2025, around 4%, compared to their previous estimate of 3.25%. This shift is significant, as normally such a hawkish stance would sink stocks, but not this time.
The market seems to be responding more to the dramatic cut in quantitative tightening, from $25 billion a month to $5 billion, which is a huge reduction. I predict that by the end of this year, we might see a return to quantitative easing.
Magic Money Machines
Elon Musk recently brought up the idea of “magic money machines” within the government, suggesting that there are computers that can issue payments out of thin air. Previously it was thought that only the Federal Reserve had that capability. Did he misspeak? This raises questions about the integrity of our financial system and whether we truly know the denominator in our monetary story. How many dollars are out there in the big wide world? If these machines exist, it could mean there’s more money in circulation than accounted for, which would have significant implications for inflation and trust in our currency.
Recession Watch
We’re on recession watch (which is a more serious level than a warning), with indicators like restaurant and bar sales showing negative growth for the second month in a row. This is a sensitive leading indicator that I watch closely. Additionally, we’re seeing domestic migration patterns shift, with places like Austin, Texas, and parts of Florida experiencing net out-migration. These trends, along with reports of airline ticket sales collapsing, suggest that a recession could already be upon us.
Conclusion
Stay nimble everyone! The potential for a recession, the Fed’s actions, and the mysterious “magic money machines” all point to a need for careful financial planning. Whether it’s considering the role of gold in your portfolio or understanding the broader economic trends, being proactive and informed is key. As always, I’ll be here to help you make sense of it all and provide insights that can guide your financial decisions.
by scotttucker