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Investing Around Inflation: “Developing a Game Plan for Financial Success”

Episode #43  |  July 7th, 2021
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In This Episode:

Right now, we’re very much at risk of seeing more and more inflation And you need to  protect yourself in this unstable economic environment.

Join me and senior financial analyst of Stansberry Research, Scott Garliss, on the show this week as we discuss everything from trends in the S&P 500 Index, lessons learned from Scott’s 20-plus years on Wall Street, hot industries poised for growth, and where to act in the market NOW.

Listen to the full episode for Scott’s prediction on a potential change in leadership in the Federal Reserve and how that might impact the dollar.

Scott warns, “Now is a great time in the market to develop a game plan because you don’t want to wait until things are bad and it’s too late.Scott’s morning note can be found on Stansberryinvestor.com, along with tons of valuable financial research and tools to help you become a better investor. For your FREE access, click here.

Have a question or topic you want to hear in a future podcast episode? Send me an email [email protected].

Guests:

Scott Garliss

Lead Editor Stansberry NewsWire
Scott Garliss is the editor of Stansberry NewsWire and Stansberry NewsWire Premium– real-time daily blogs in which he and his analysts scour the markets to offer you a better understanding of the forces driving market volatility… and recommending the best ways to trade that volatility.

Transcript:

Trish Regan:               [Music playing] Inflation, inflation, inflation, inflation. It’s the kind of thing I think about when I go to bed at night and wake up in the morning. Because you know what? We’re getting a lot of it. Just look at last month… 5% increase. I mean, this is big. This is huge. You know, the Fed was trying to get inflation for a while. Now they’re really doing it, right? It makes sense. They’ve got it because you had an economy that was opening up after multiple rounds of stimulus. I said after the first round of stimulus, “No more. No more.”

You know what? Because we run all kinds of other risks, unintended consequences risks. And yet, we got two more rounds of stimulus, and we’ve got unemployment checks lasting through September unless you happen to live in a Conservative state where they’ve figured out that this may not be the best route to actually getting people back to work. And so, they’ve suspended those checks. And what do you know? In some of those Conservative states, people are actually now going back to work, proving that… you know what? Government needs to be there in absolute times of need.

But they don’t need to do things that intentionally would suppress economic activity. Anyway. We’ve got all this inflation bubbling up. And the Fed keeps telling us, “Oh, nothing to see here. Don’t worry about it.” And I’m saying, “But you should be worried about it. You can’t in good conscience, frankly – if you’re a governor of the Federal Reserve you really shouldn’t be saying, “Well, we’re not going to pay attention to that.”

You got Jerome Powell saying he’s not going to pay attention to it. He doesn’t care. He’s just looking at employment numbers. I don’t think you can look at one without the other. I think the most important thing to do as an economist is to be looking at every single real-time data point you can get your hands on. And then, you analyze from there. So right now, we are very much, in my view, at risk of seeing more and more and more inflation.

And I think that people need to think about how to protect themselves in that environment. First of all, you want to be in stocks, right? Because if there’s inflation happening – we saw it during the Barack Obama/Joe Biden years, where for eight straight years, the average American didn’t do so hot, right? Median incomes, they didn’t budge. But you know what did? The market. The market grew and grew and grew because, in part, you had the Federal Reserve printing, printing, printing. Janet Yellen there at the time.

Well, now you have a Federal Reserve that’s there printing, printing, printing. Janet Yellen’s not running the Fed, but I have a feeling she’s maybe dictating a few things behind the scenes. And Jerome Powell, well, his job may depend on keeping Janet Yellen happy. And Janet Yellen wants lots of liquidity in the system. And she’s going to get it via the Fed and, with any luck, she and Biden will get it via the taxpayer. And so, there’s all this money out there that lends itself increasingly to more inflation. So how do you protect yourself? Right? If you’re in dollars and your dollar starts to go down, that’s going to be a big, big hit.

So I do like the market. I’m so excited to have on the show with us today, my friend Scott Garliss. He’s the senior analyst at Stansberry Research and really just a smart, smart guy. He may feel a little differently on inflation than I do, but he still likes the market. He likes a lot of things in this market right now. So I want you to hear him out. He’s the editor of the Stansberry NewsWire. Really terrific daily synopses of what’s going on in the world today from an economic and market standpoint. I read it every single day. I talk to Scott a lot. As I said, he’s a friend. He’s also a colleague, as this podcast is sponsored by Stansberry.

But this is terrific, terrific research, and he has his fingers on everything that’s going on in the world today with all of his real-time, daily blogs. I mean, he’s just scouring all the news out there so that you get an understanding of the forces that are really driving these markets and all of this volatility. So I’m so excited – you know, he spent 20 years trading for some of the biggest investment banks in the country. At Stifel Nicolaus, at First Union Securities, Wachovia Securities. He joined Stansberry Research in 2017. And we are thrilled to have him here on the program today. Scott, welcome. Good to talk to you.

 

Scott Garliss:              Trish, my pleasure. Thanks so much for having me.

 

Trish Regan:               I’ve been watching all this inflation data, and I’ve been listening to all the Fed guys. And they tell us it’s transitory. I actually am a little bit concerned about an overheating in the economy but not concerned enough to say I would pull everything out, right? Like, and I’ve been concerned. I told the listeners this in the past. I was very concerned in 2007. I was very concerned as we went into 2001. There have been a lot of moments, right, where I say, “OK. This is getting a little bit nutty.”

And I look at it now and I’m like, “Wow. OK. Here we go again. Like, up, up, up, and away.” But it’s not as though I would want to take my money out right now. I mean, maybe if I was retiring next year, I’m in it for the long haul. But this is, to me… you know, you keep putting money in… because I don’t see the bottom coming out from under just yet. I want to get your views on all of this.

 

Scott Garliss:              Yeah. Yeah. No. That’s totally fair. You know, look. I think the first thing when we look at inflation – we need to realize, “why do we have inflation?” Well, one of the big things that’s driving inflation is there’s growth. There’s demand for goods. You know, I go back to the financial crisis. I mean, there wasn’t demand for anything, and the economy fell apart early on. In the coronavirus pandemic, it was looking very much the same. So, you know, the Fed was trying to do what they thought was the best for the economy, and that was to stimulate in terms of easy money… provide lots of liquidity because easy access to funds means people will start spending again. But there does come a point where it needs to be withdrawal.

 

Trish Regan:               Well, and the question is, “At what point do we get there? And can the economy withstand it?” I actually think it probably could, and the sooner they communicate that, the better. But politically speaking, they may not like that. I mean, I remember Donald Trump used to stomp his feet whenever the Fed was raising rates, and he’s like, “Why can’t they be lower? Why can’t they be lower?” And that’s – he wasn’t supposed to say that, of course, because they’re supposed to be a church and state. But you now have the Treasury secretary, who’s the former head of the Federal Reserve – Janet Yellen – and she knows that lower interest rates will help this economy along. So there is certainly an incentive for them to keep things low. Do you think Jerome Powell is going to be at all influenced by that?

 

Scott Garliss:              I do but I don’t. Which is not a great answer. But I think as the chairman of the Federal Reserve, he should not be influenced by any of that. Where I get skeptical is, I look at things like, “Hey, look. The Fed is there to stabilize our financial system.” And when you have the central bank start talking about how it’s going to help with the environment and all these other things, it’s like, “Well, that’s sort of” – I feel like the waters are being muddied a bit, because that’s not really your goal and your objective as a central bank. Your objective as a central bank, again, is to make sure the financial system is working properly. And that’s really it, right? And what we saw coming out of the financial crisis is, “Let’s make sure the banks have plenty of liquidity so, if there’s a crisis again, we won’t be in, sort of, any dire circumstances.”

 

Trish Regan:               And they do, right? I mean, they just had the stress test, and now they’re giving money back to shareholders. And they’ve got, you know, plenty of liquidity. And so, at some point, I imagine things will have to start to shift. If they are going to shift – right now, first it was, “Oh. We’re not going to do anything until 2024.” And then it was 2023, and now they’re communicating 2022. Do you think that we might get some warnings or some signals, some tea leaves that we can read – I don’t know – maybe going into later this summer?

 

Scott Garliss:              Totally. So going back to the first part of the conversation with inflation. So, inflation’s definitely picked up again… growth. But the other thing that we’re seeing here is, we are lapping very easy comparisons versus a year ago. You know, a year ago in April and May, in particular, those were the lowest points that we saw economically because of social distancing and lockdowns. So economic demand was abysmal. And it was a really easy comparison to lap. So, when you start seeing those numbers on a year-over-year basis, they look incredible… but going forward, you’re going to see that as times get harder, the numbers should slow down.

If they don’t, then you need to really start – the Fed needs to start thinking about things and saying, “Well, hey. You know, maybe we have a problem here. Because inflation’s picking up.” So, Bernanke mandated a 2% inflation target for PCE – personal consumption expenditures – back in 2012. Since then, it’s basically been impossible for the Fed to get to that level. You know, it happened briefly before, and now it’s happened again this year. And that’s sort of where they’ve been trying to go the whole time. So now what we saw was very recent. It was last year. I believe it was last year. They said, “Hey,” – Richard Clarida was the vice chairman, very instrumental in this – “We’re going to have a sustained 2% inflation target.”

So for somebody that’s thinking, “Well, what’s sustained” – it’s basically like an average. So, the idea would be, if you’re running at 1%, you need to run at 3% afterward to get the average up to two. So, the Fed – in the past, the Fed would’ve acted rather quickly at 2%, and now they wait for the average to get there. But what they are going to do – and we saw this coming out of the financial crisis – they are going to be very obvious about when they start to tighten policy. And they have said that. But we’ll get messaging way ahead of time.

 

Trish Regan:               I think you’re right. And I just thought it was a little strange to be saying, “You know, 2024,” and then 2023… I’m just like, “Yeah. That doesn’t really, really make sense.” But I think that that was a little bit of a goose, right, to the system. They just wanted to like goose the market so that investors would feel good while we were sort of getting over this hump and allowing the economy to stabilize and to grow. But it just can’t continue indefinitely because there’s a lot of irresponsible scenarios that could be created. I don’t think we’re there yet. I want to talk to you about P/E ratios.

Because you and I have talked, you know, behind the scenes. And just again, I want to remind people to go to stansberryresearch.com. You can read Scott’s writings there. He has a tremendous morning note that I think everybody should just read to start their morning and get their day going. But you and I have talked about P/E ratios. My thought is, “How is this possible? We’re trading at, you know, on average 40 times earnings” – which is way above historical comparisons of – what – 15 times earnings. And so, you have a reason for that. And I think people should hear it. Explain to me why you’re not completely nervous about 40 times earnings.

 

Scott Garliss:              Yeah. Sure. So what I’m looking at right now, I’m looking at the S&P 500 Index. So in terms of right now earnings, I’m looking at like 30.5. So the price-to-earnings multiple. And the forward 12 months is 22.5, basically. You have to go out a couple more years before you get below a 20 multiple, where you get to 18.5. so what concerns me less about this – there are a couple of things. One, we have a really low inflation environment, which… so, sorry, not low inflation… low-interest-rate environment. Yeah.

 

Trish Regan:               I was going to say.

 

Scott Garliss:              Yeah. Yeah. Sorry. [Laughs] Low-interest-rate environment. So it’s really easy to borrow money. And again, part of the reason inflation’s picking up is because there is tons of liquidity in the financial system. So as there’s more capital, you have to do something with it, right? You’re going to invest because you want to get a return. So that’s going to drive more people to invest in risk. And when you think of risk, you think of bonds as being safe – you think of them as boring… because the returns might be as great, but it’s safer. There’s going to be less volatility there versus investing in the stock market where there’s going to be a lot more risk.

And you can walk in one day, everything’s great… the next day, some story comes out about who-knows-what and the stocks going to zero. But what I look at and what doesn’t worry me as much about the multiple right now is the fact that back in the financial crisis, I watched this play out where analysts… they kept cutting estimates. And as they cut estimates, the multiple on the S&P skyrocketed. So basically, mutual funds, hedge funds, would all come in and start selling stocks. Again, until they drop the S&P multiple down to where they felt it was fair value. Earnings would come out, analysts would cut their estimates again, the multiple would go up, they would start tanking the markets again because they drop the multiple back down to fair value.

Now, the flip side of this was what we saw in the pandemic. All these analysts – basically been there through the financial crisis, they were still scarred. And they took a lot of backlash from the media, from Congress, from investors from the big mutual and hedge funds that they were really slow to react last time, and they were slow to cut their numbers. And because of that, the market sell-off dragged out for so long.

So what did they do this time? They came in, and they crushed numbers right away. They’re like, “You know what? I’m not even going to wait to find out what happens.” So they destroyed the market’s multiple and basically, so the market looks really elevated… everybody sold off. But then what happened was, basically the economy held up and business – especially for technology companies – wound up being really good. So when we started getting earnings, all of a sudden, all the numbers had to go up and the multiples didn’t look that expensive. So people kept buying stocks.

And so now, what we’re seeing – the reverse of the cycle – is analysts are way behind the game. So even though the multiples seem expensive, as earnings keep going up the multiples start going down. And I don’t think we’re done with that cycle yet. I think last quarter you saw one of the best earnings growth results ever. And I think this quarter, you might see even better numbers. They’re going to have to go raise again. And that means it’s going to drop the multiple in the S&P, which can drive it higher once more.

 

Trish Regan:               So in other words, you’ve got to kind of understand the fluidity of the situation that we’re living through in order to understand these multiples.

 

Scott Garliss:              Yeah. So, think about it, like, history is written by the victors and would come… you know, in hindsight – so people will go back and look at it years down the road and be like, “Well, what happened?” And the multiples we’re looking at right now might not be the multiples that history records. Because after the final numbers come out and they get everything right, my thinking is it’ll probably drop those multiples cheaper. So it seems expensive now, but it won’t be as expensive when we look back. Does that make sense?

 

Trish Regan:               Yep. Yep. That totally makes sense. So that has you still liking this market overall.

 

Scott Garliss:              Yes. Yes. You know, [laughs] as I explained to a buddy of mine the other day, I very much still like this market. But I feel like we’re starting to get toward that territory where we’re dancing on the razor’s edge a little bit.

 

Trish Regan:               Yeah. I think you told me that the other day. [Laughs] Maybe me and your – no. I feel that way too. But, you know, look. Again. I know that when I’ve – it’s like I sense it, right? When things start getting really, really, really nuts. And when you’re talking about something like a systemic crisis like we had in 2008, that’s very different than, say, the COVID crisis. It’s very different.

Right now, I know some investors are getting a little bit nervous because of the delta variant and what effect that could have on Europe and here as well. But I think we kind of know, right? It’s like, “All right, guys. We’ve seen this movie before.” You’ve got to anticipate, if in fact that were to be that bad, there are companies that will be poised to do just fine, and I think the market overall will still do just fine. And you’ve got to be selective about things.

But look. It would be foolish, I think, to take your ball and go home at this stage. It doesn’t mean that I don’t have my concerns, and I worry about whether or not the Fed is really doing the right thing, I worry about inflation for sure. I might worry about inflation more than you. But even in worrying about inflation, Scott, what I say is, “You still want to be in the market.” Right? Because all these stocks are priced to dollars. Dollar starts going south, it’s just going to take that many more dollars to buy these companies or to buy oil, etc.

 

Scott Garliss:              Yeah. And if you’re sitting in cash and the dollar is getting destroyed in value, guess what? You’re worth less tomorrow than you were yesterday. And that’s really not doing you any good. It doesn’t mean you run out and throw everything you have into the stock market, but – to your point – if you’re not at least doing something, you’re doing yourself a disservice. Like, take advantage of a 401(k) that your company might offer and just be chipping away and participate in those gains. Because the stock market average is 7.5 – or the S&P 500 is what I’m referring to when I say the stock market. But the average is 7.5% gain, I believe since I think 1922 or 1928 even with all the crazy ups and downs. And I like those returns every year.

 

Trish Regan:               When you look at the market overall, I mean, some things are just so highly valued – tech, for example. That’s one where people start to get a little nervous and they say, “OK. Really, how much more upside could possibly be coming?” When you look at the so-called fang stocks, when you look at the technology sector, how do you feel about it?

 

Scott Garliss:              [Laughs] That’s where I have my most exposure, is in technology. Because –

 

Trish Regan:               You’re bullish on tech.

 

Scott Garliss:              Yes. Yes.

 

Trish Regan:               And you have the most exposure because you still feel that this is poised for growth.

 

Scott Garliss:              My life is not becoming – I’m trying to think of the right words. But it’s not less technology-oriented. It’s more technology-oriented every day. And that was before the coronavirus pandemic happened. Coronavirus pandemic just accelerated all of that. So I just look at the way society and life is involving. And, you know, I can’t say that I’d love stuff like Facebook in terms of… I don’t go on Facebook every day. But I use technology more… whether it’s for work, it’s for home, watching TV with the kids, music in the house. You name it.

But it makes our lives easier and more efficient. And my bike rides. I’m always buying new tech gadgets because they make my bike rides more efficient. I can watch my heart rate when I’m doing stuff, make sure my workouts are in a lower threshold versus a high threshold. Things like this. And more of my money and my kids’ money and my wife’s money and our time is spent using technology. So to me, why don’t you want to invest in something that you’re using a lot?

 

Trish Regan:               Because some people might say, “Is it too expensive?” I mean, I agree with you, by the way. I totally agree with your premise. But what do you say to those who say, “Gosh. You know, these are looking kind of steep”?

 

Scott Garliss:              I’ll give you a great example. Amazon. I have been talked out of investing in Amazon a number of times. And I specifically remember one instance that the stock was just below $400. And the story was, “How can you buy this company? The price-to-earnings multiple’s way too high.” And it just, you know, “These guys don’t make money,” all this other stuff. And against my better judgment, I did not invest in Amazon. I want to say the stock – to be specific, it was about $385 at the time.

Amazon right now is sitting at $3,439. So I look back at that stuff, and that was probably… I’ll say that was probably 10 years ago. So maybe not quite. But I kick myself on that one. It’s almost a 10-times-return. So again. I just try to look at these things as… look at it from like, “Do I use these things?” And I start to look at investments that way too. And I feel like others are going to start doing the same, I think it’s a great idea. You know, it’s funny. My wife, we lived in New York.

And it’s around the financial crisis. And she was going to the gym. And she’s like, “Hey. What do you think of this company Lululemon?” She said, “You know, I’ve started wearing some of their stuff and I love it. It’s incredible.” And I noticed all these other people in the gym. And I’m like, “It’s a fad.” It was $6 at the time. And it’s now – where is it? Hang on a second. $366. Again, it was something that she was onto, a trend, and she still buys it all the time. And I see a lot of other people do as well. And so, it’s something that she believed in and we should’ve acted on. And we didn’t.

 

Trish Regan:               You know, I think that’s a really important point, though. Because, you know, sometimes you have to learn to trust yourself, right? I think when it comes to investing. And it’s like, if you use this, if you think it’s a good product, if you think it’s here to stay, then – it’s like, “You know, take a leap of faith on your own sort of gut instinct.” Right?

 

Scott Garliss:              Totally. So I’ll give you another real-world example of that stuff. Back in the turn of the financial crisis, I have some family members who are very involved in the construction business. And one of them owns an excavating company. He started it with a single back-hoe and has turned it into a huge company now. His business got killed on the front end of the financial crisis. But then, we talked. And it started to turn. He started to see things pick up.

And talking to a bunch of my clients – I spent 22 years on Wall Street. I covered some of the biggest hedge funds and mutual funds in the world. And they took me very skeptically at first. And I just said, “Look. This guy started to see a lot of bids and new jobs roll in the door.” And for me, that’s important because the construction industry is the NAHB. The National Association of Homebuilders puts it at 15% to 18% of GDP on an annual basis.

So, we’ll say like 16, 17%. That’s a big chunk of the economy. And when I see things like that are starting to turn, I think that’s incredibly important. And so, I shared that with people. And those people that were skeptical about that at first – because that’s real-world application – down the road, they started asking me. They’re like, “Hey. Well, how’s that guy’s business doing?”

Because they were very interested in it as a read on what’s going on economically. And it was sort of the same thing through the coronavirus pandemic. And we talked a lot. And his business never fell off. And we recently talked again, and he was telling me that he’s as busy as he’s ever been, and he has at least two years’ worth of backlog, and he’s got tons of contracts to be bid on rolling in the door. So I listen to and hear that stuff, and I say… well, I think to myself. I’m like, “You know, this tells me there are tons of good stuff coming down the pike still on an economic basis.

 

Trish Regan:               See, I think it’s important to listen to oneself. You just have to kind of recognize these trends that you’re seeing in – you know, that’s like what Warren Buffett says. You know? You’ve got to, like, see it, use it, believe in it. And that’s sometimes the way you find like the best stocks of all. Lululemon’s a great example.

 

Scott Garliss:              Yep. Peter Lynch of Fidelity. He’s a very famous investor, and he’s a big believer in that as well.

 

Trish Regan:               Yeah. No. I think that… and people do – your point about technology is very true because we’re all – even me, right? I kind of resisted. You know? For a long time. And now, I’m getting really and truly far more up-to-speed – which is important because I need to be able to make sure I police the kids as they get a little older on all this technology. But great – here’s a good example of exactly what you’re talking about. Roblox. OK? During the pandemic, what did every kid in America do? And by the way, all us parents were working.

So we were like, “You know, whatever. OK. You can’t go play with your friends. You can’t go anywhere. Sure, there’s this thing called Roblox.” I mean, I swore I was never going to let my kids play video games, and then all of a sudden, they find this game and they’re loving it. They’re loving it. And then, I see that Roblox is going public. So I was like, “This is a worthwhile investment.” And I talked about it with some of my listeners and wrote about it because this was a great example of a company that I actually do think has a tremendous future as we migrate into this online world. And, you know, even though we don’t want our kids doing it, they indeed are playing it.

 

Scott Garliss:              Completely. I could not agree with you more. My children have – they hounded us forever to let us let them play it.

 

Trish Regan:               Yeah. I know. And I joke that my kids, actually, that they understand Roblox currency better than they do the U.S. dollar. Which, by the way, is a good sign for cryptos if you want to really extrapolate from that. But anyway. Let me go back to the Fed for a second. Because how does he stay in that seat, being Trump’s guy, given where we are right now? I don’t know if he can.

 

Scott Garliss:              I don’t think he can. So let’s take that part back to what we just talked about with the construction industry commentary, right? So I talked to some other friends too. It’s a similar story. They’re in the construction business, and they are just jammed with work all the time. So again. If we look at that and we extrapolate that to, “OK. Construction is almost one-fifth of our economy” – and that part is really humming despite what any of the media stories try to tell you about how bad things are. This is good. Construction employs a lot of people.

That puts the Fed in a position where the Fed’s going to have to do something in terms of all the easy money policy. It’s got to pull back on it at some point. Because what I’m seeing and hearing is, the economy is doing pretty well on its own… now, what’s going on in D.C. – the current administration. The last thing I think they’d want to hear right now is that the Fed wants to stimulate the economy less. And that – so Powell not only has the issue of being a Trump appointee, but he has the issue of he’s probably going to have to tighten policy before his term comes up again in February. And that’s not going to sit well.

 

Trish Regan:               Not going to sit well with who? [Laughs]

 

Scott Garliss:              Well, it’s not going to sit well with the White House or Democrats. And I think at the end of the day, the White House decides whether or not Powell gets renominated for the spot. And it would seem very much so that he’s going to be a political casualty. I personally hope he’s not because, as dovish as he’s been through all this, I think he’s really a pragmatist and he’s just been trying to do what’s best for the U.S. economy. But at some point, I think he sees the writing on the wall, that we have to start to pull back.

 

Trish Regan:               OK. And so, they won’t like that. That won’t sit well. And if he gets tossed aside, who’s your money on?

 

Scott Garliss:              Lael Brainard. She is an Obama appointee. And she is very dovish. So, when you talk about Fed numbers, you think about them in terms of dovish, inclined to stimulate… centrist, which neither are inclined to stimulate or pull back… and then hawkish, which means you’re inclined to hike rates. So yeah. Brainard, she was apparently… she was considered for that Treasury post. She didn’t get it, obviously Janet Yellen did. But yeah. She I think would be the odds-on favorite right now to become the next Fed… the next Fed governor.

 

Trish Regan:               OK. But then, don’t we get back in some kind of vicious cycle? At that point, do you think then people should actually be a little bit worried about some irresponsible policy? Because you like Powell. You trust Powell. You think he’s doing the right thing. You think at some point he’s going to telegraph, “We need to raise.” But then if they say, “Oh, you raised. We don’t like that. Boom. Let’s put somebody else in there” – and if that person is far more dovish, are we in a riskier scenario?

 

Scott Garliss:              Look. I think we sort of reached that point where we’ve done a ton of this spending. And so, I get the current infrastructure negotiations. And look. They’re looking like if they get through in their current form, it’ll be less than what the Democrats were asking for… which I think the market will like that it’s less spending. But we’re getting to that point where it’s pretty saturated. We need to see the economy stand on its own. It can’t just be spending, you know… huge amounts of spending forever. That’s just not going to work. To your point, that’s when you really start overheating things. And that would be bad. Because if we really start to destroy the dollar, then the value of what people are sitting on their bank accounts is really going to be in trouble.

 

Trish Regan:               Well, I think that’s what to watch for then. You know, maybe as we can enjoy this rally as long as it lasts. And hopefully, it’s a really good ride. I mean, what are your – so a change in Federal Reserve leadership seems to be one of the headwinds you’re looking at. Would you also consider the policy changes in the way of more taxes for businesses and for individuals a potential red flag? I mean, what are the headwinds out there that could derail the success?

 

Scott Garliss:              Definitely. They’re not going to be great. I mean, I think – so let’s go back to the Fed policy for a second and policy change and potential implications. There are two other people that are up for their posts to be renewed coming up. And I believe it’s October. It’s Randal Quarles – it’s October/November maybe. He is also a Trump appointee. He is the banking supervision person on the Board of Governors. And then, Richard Clarida, he is the vice chair of the Fed. He’s up for renewal in January and then Powell in February.

So yeah. I think we’re probably looking at Quarles and Clarida would be the canaries in the coal mine, right? If they get booted and they don’t get renominated, somebody ese gets nominated for their spots, that’s probably pretty telling of what could happen with Powell. Which would be really interesting, especially if Clarida were to be re-nominated. Because, like I said earlier, Clarida was the guy responsible for the average inflation target.

Which is actually really stimulative for the economy. But the other thing – so I think, yeah, if you saw taxes go up for businesses and individuals. The problem there is, if you’re giving more money to the government, that means you have less more money in your pocket to spend on things. And businesses want to make margins. So they’re not going to spend more. They’ll pull back on some investment. And that would be bad for the economy.

 

Trish Regan:               Right. And do you think that there’s a likelihood of that really happening? Or do you think when push comes to shove, even Democrats – for all their talk about socialism – know that it’s really not going to help things out?

 

Scott Garliss:              There are people in Congress that would very much like to raise taxes. I think some of them are – some of them are pandering to their base as well. But what it comes down to is a numbers game. And I don’t know if people always think about what goes on in D.C. this way. But the House of Representatives – off the top of my head is, it’s like 435-ish representatives in total. So you only need to get the majority there. Right now, it’s Democratically controlled.

So it’s easy for them – so they’re going to get their votes. But it’s in the Senate where the problem is. Because you have to have 60 votes in the Senate. So right now, it’s a 48-50 split with two independents who caucus with the Democrats. So it’s really a 50-50 Senate. But they have to be able to get those 10 extra votes. And right now, I just don’t think they can get that for raising taxes.

 

Trish Regan:               Yeah. I think you’re right. And [laughs] let’s hope it stays that way. At least if people are invested in the market, I think you want it to stay that way. Listen, Scott. You know, we’re colleagues as well because Stansberry is the sponsor of this podcast. But I’m not kidding. I mean, really, really important, insightful stuff that people should be reading every single day. So go to stansberryreserach.com. Look for Scott’s note because he lays it all out there. And you’ll definitely be up-to-speed very quickly. Thank you again, Scott. I appreciate you taking the time today.

 

Scott Garliss:              Oh, my gosh, Trish. Thank you. And can I throw one last tidbit out there?

 

Trish Regan:               Sure.

 

Scott Garliss:              So in terms of – yeah. Again, love the market still. I still think we’re headed higher. I think we can even be looking at a crazy run that people just aren’t prepared for. But I would just tell people that are investors and they want to let it ride… just have like a trailing stop on your portfolio positions. That’s something like when it hits its high, when it drops 20%, it sends you a signal telling you to get out. Now’s a great time in the market. Develop a game plan. Because you don’t want to develop a game plan when things are bad. Be prepared.

 

Trish Regan:               Wise advice. Because too often, we get very emotional about these things. And, you know, when things get that bad you have to really know, “Are you going in at that point? Are you exiting?” And having that game plan, I think, Scott, is so important. Because you can’t allow yourself… I mean, you want to be able to sleep at night. I always say that. Never put at risk more than you can really comfortably afford. Because you’ve got to think about your trajectory, when you’re retiring, etc.

And you’ve got to be able to sleep at night. You’ve got to be able to know that even if… and I don’t think we’d be in a scenario where something went to zero. But, you know, I did live through Lehman Brothers and the 2008. So it’s not unthinkable to think that some stocks could quite literally go to zero. And so, I think that people just need to be prepared but not overreact. That’s what’s really hard. Just don’t overreact. And so, Scott’s right… have a game plan and make sure you stick to it. Thank you so much, sir.

 

Scott Garliss:              Thank you. Have a great day. [Music plays and stops]

 

Trish Regan:               Listeners to my show, I want you to know my friend and AMC contributor former U.S. presidential candidate and 22-year congressional veteran, Dr. Ron Paul. Like me, he gets a little worried about the financial state of our economy. All his concerns about inflation, I certainly share… the concerns he has about the enormous effects bad policy would have on our citizens. He and I are right in sync on this, while the Fed is continuing its printing press ways and inflation is increasingly climbing at alarming levels. Every American needs to be able to protect themselves. Financially. And Dr. Paul, he has some answers for you on how exactly you can do it.

He explains in a very short video the No. 1 step every American needs to take to prepare themselves right now from our current economic situation. I want you to go to messagefromtrish.com. Remember that – to see how you can protect yourself financially. Again, that is messagefromtrish.com. I’m sharing with you thoughts from my friend, former presidential candidate, 22-year congressional veteran Dr. Ron Paul. Go to messagefromtrish.com. [Music plays and stops]

 

Such an interesting conversation. You know what? This is information that you can use. This is information that you should really think about. I think there’s just so much good advice in all of this.

So keep listening, everyone. Keep going to americanconsequences.com where you can get all of my writings. I’m writing there regularly. You can get the podcast there. Make sure you go there. Stansberry Research, where you can get some of the wonderful commentary from Scott, and let’s make sure that we make some money together, right? I mean, I think that’s the idea. To make sure that we take care of ourselves and our families and that we provide for the future. So thank you again for listening. I want you to tune in next week. And until then, I’ll see you at americanconsequences.com as well as on my daily podcast, the Trish Regan Show. And have a wonderful week. [Music plays]

 

Announcer:                 Thank you for listening to this episode of American Consequences. Want more Trish? Read her weekly articles Thursdays in our magazine at americanconsequences.com and subscribe for free to get all of our daily articles and the monthly magazine. We’ve lot to hear from you too. Send Trish a note, [email protected] This broadcast is for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Trish Regan’s American Consequences is produced by Stansberry Research and American Consequences and is copyrighted by the Stansberry Radio Network.

 

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