let's turn back to the major averages joining us now
. David Straczynski, Ceo of sound planning group,
a financial services firm. David welcome back another day
. Another rollercoaster on Wall Street. Especially as Halloween
. What do you make of today's activity? Well
, today is, uh, is another very interesting
day. I obviously had this incredible month that since
1976. Love that. Uh, you know,
as we're looking at things today. Yeah, metas
down again. Obviously saw Microsoft take big hits here
. Um, I think that what we're seeing right
now is, is we're seeing, um, you
know, Chairman Powell could have been dovish was really
the expectation and, and that is what really drove
markets. Obviously we're gonna see what happens here in
the next couple of days. But I also think
that, that we need to be paying attention to
the fact that october traditionally tends to be a pretty
strong month, especially as we move into midterms.
And so we're obviously expecting, or at least polls
are expecting, um, a red wave, which
would mean that there would be more of a neutralizing
. So, uh, you know, president,
I would honestly power, but he would be losing
some of the Congress and the House potentially within that
. So maybe there's a sentiment amongst people here today
that, yes, that's a good thing. But
maybe it's, it's, it's, it's cool enough
and it's not quite enough to keep things running.
It was the final trading day for the month of
october with the dow soaring its best performance since 1976
. What's the reason for this huge comeback. David
, uh, well, it it's important for what
I just said just a moment ago that uh that
that we had, you know, this, this
wonderful october with the Fed potentially pivoting. But then
ultimately, what was interesting is that the NASDAQ underperformed
by 10%. So I would just even say it's
kinda interesting, we see a shift right now and
, and what is, is in favor or not
and fundamentally, uh, you know, these companies
like meta are not standing up to uh, you
know, things in the very same way that some
of the big organizations like the dow uh and not
even the biggest names in the dow, but but
the dow has ultimately been uh been producing with.
So uh, you know, these are, these
are important things for us to be looking at right
now, but I don't think that we're seeing much
more than just a bull bounce in the midst of
what is a recession at least Based on how we
used to define them and what most people think that
we're ultimately heading into. So it doesn't seem like
a super peachy world right now, especially given,
you know, some of the new information that came
out about about housing and so maybe that's another part
of the reason why things are beginning to taper as
we are seeing 86% fewer loan applications here today than
the previous year, which is staggering. But more
importantly, we're seeing more inventory show up right now
as, as the housing purchases have hit their 2010
low. So that number just came out on friday
staying in the month of october, the SNP rose
8% the dow rose 14% the NASDAQ rose 3.9%.
Is it safe to say that the bear market is
behind us? I don't think that the bear market
is behind us. Um, I think that,
that we are in a global recession right now and
we may refer to this timeframe in history as the
great global reset. As we just have so many
different headwinds today that are taking place. Look at
our friends in, in UK that are sitting here
experiencing, you know, 16 17% inflation right now
. Um, you know, one thing to also
understand is that our oil prices have been down in
the United States over the last, you know,
several months as a result of some of what the
biden administration's been doing is, Uh, they've been
selling, uh, oil from our strategic petroleum reserve
. And ultimately we're sitting about half of what we
would normally have. And so that's a record low
. But, but one last concern here is that
we have literally three weeks worth of diesel left according
to reports, uh, November 25 first is going
to be the day that the United States will run
out of diesel fuel, which, if any of
us understand how important that is. That's our semi
trucks, that's generators, that's fuel, that's heat
as we're heading into the winter and we don't really
have an answer for it. But I will share
with you that there's a little bit of oil and
left and that strategic petroleum reserve enough to last six
hours. So when, and how do we know
if markets have bottomed? Um, I think that
what we will see is we, we need to
see the Fed begin to taper right? And,
and, and that's not gonna happen until we've meaningfully
seen inflation be reduced. And so right now,
we've seen it kind of go down a little bit
. But is that because of the oil, the
Saudi arabians think so. And, and, and
so that's a problem when we see a turn though
. Well, the Fed is gonna have to pick
of it. Additionally, I think that we're gonna
need to, to see some supply side adjustments here
. Um, you know, the United States has
all the tools to affect supply side. It just
seems like we're politically motivated to not be doing it
right now. And so that's a real big challenge
, uh, to, to our nation. Because
, you know, as an example, if we
got oil figured out, if we just started,
you know, producing more at home, well then
our allies would have more, the price would go
down, Putin wouldn't have the same dollar, uh
, to be able to wage a war with,
which, you know, because you can't have a
war, there's, there's not high oil prices,
um, we would, we would become more stable
as a, as a nation again. And so
I don't think until we see supply side changes that
the, the demand impact that the Federal Reserve is
doing, it's just not going to allow the consumer
to uh, to really make, you know,
these things happen. And we are drowning right now
in inflation specifically from those that are in the low
or middle class. And this is just an erosion
right now, as we have two years of this
high inflation That, you know, if you're just
even hitting 8.3 a year, which were higher than
that for sure this year, um, you know
, you've lost a full paycheck each year, that
are a full month of paychecks actually each year and
there were now two months into their two years into
that. So I'm very concerned about the American consumer
right now, if we do not get some things
figured out, if we cannot get interest rates low
On housing mortgages, just understand this, housing is
a lagging indicator of economic health. And when we
get numbers that come in and say that we have
the lowest housing, uh, sales since 2010,
well, then that should cause us to pause for
a moment. And the biggest difference here is that
the federal reserve has raised the rates so fast and
so if they're going to continue to raise rates quickly
, if we're going to continue to see heights of
maybe, you know, 4.5 5% potentially fire higher
than 5% from the Fed funds rate. Um,
I don't think that we're out of the woods quite
yet. So Jamie Diamond might have had it right
that we're in the middle of an egg economic hurricane
right now and we need to kind of brace for
a minute as, as this impact is continuing to
unfold and I think that the data is ultimately coming
in right now as you all know, earning season
is in full swing. We have some results from
being companies in different sectors, your biggest takeaways.
Well, I, I think that earnings have been
mixed. Right. So we've seen some good,
we've seen some bad, the companies have been bad
have been hit. But could we think about this
maybe from a step back for a second? We
just talked about inflation. What about inflation adjusted earnings
because see I own a company, my wife owns
, a roofing company actually. And so what's amazing
is they're gonna have record sales this year, but
they have the exact same amount of crews, the
exact same Amount of jobs. And part of the
reason why the, the amount is higher is because
, well, the prices of everything have gone up
and they had to charge more effectively. So if
we think about that and abstract that from earnings right
now, when we look at 8% earnings and maybe
a two or 4% growth, hopefully it's positive,
not negative. I would say that that's actually a
confirmation that we went backwards and so the the economy
is able to, you know, project and of
course, you know, we're driving, you know
, forward, but we're looking through the rear view
at, you know, a month or two ago
, those uh C. P. I. We're
gonna take a look at jolts. We're gonna be
taking a look at a lot of these different things
as they're coming out right now. And I just
don't see an awesome backdrop unfolding when we look at
this from an inflation adjusted or real expectations of what
we should be receiving. The Federal Reserve is meeting
again this week. Another rate hike may be on
the way. Any chance it will pivot or pause
this time around. David. I vote that they
pivot or pause. Um I feel like they would
be uh intentional to to understand that that we're in
some challenging places, but the Fed is really in
a challenging place because let's just say that they do
pause. Okay, so what happens is the stock
market's going to go through the roof. That's the
exact opposite that they want. Treasuries will reduce people
start spending more money, can't do that. I
think that they're gonna come in strong. I think
that they're gonna stay steady. I think that the
Federal Reserve is going to be very clear that they
are going for that they need to see a 1
to 1 unemployment ratio to those that are seeking,
we're seeing, you know, not quite a 2
to 1, but you know, obviously we get
the numbers here tomorrow. Um, I think that
the Fed is going to just continue on as they
shared, but note this, they definitely know how
to pivot. Uh, and Canada last, I
think it was last week on Wednesday, did pivot
, they did a 50 basis point instead of a
500.0.75. So hey, Canada just did it.
I think there's observations that there can be some cooling
, but at the same time if the Fed does
, so it could be very, very bad because
the market will go up and that's what they're trying
to not have happened. They need to destroy demand
and they need to ultimately inhibit the consumer from spending
more money. That's a not a great story for
the consumer, but we need to get our economy
just right. And unfortunately, the balance sheet is
still full as well, trillions and trillions of dollars
that they have not yet offset. So, uh
, it doesn't look like a, like a great
picture here today. I wouldn't want to be Chairman
jerome Powell. Um, you know, he was
about a year late from starting this, uh,
uh, these increases that began in March and we
can't go back and redo it again, We have
to, you know, play this thing forward.
So I just wish and hope that supply side economics
would come into play, that we could loose up
some regulations and not put more on oil companies,
not add 87,000 I. R. S. Agents
, you know, which ultimately kind of tells me
that they don't think that the Us people are,
are doing things appropriately or right. So that may
be a significant surprise to us as we start 2023
. And we look at a much higher tax need
that the internal revenue service is going to need to
be generating given all the spending that's taking place.
David Ceo of Sound Planning Group, we always appreciate
your insight. Thank you so much.