KEY TAKEAWAYS
Join Nathan Krampe, CFP®, founder of Lion’s Wealth Management as he discusses the outlook for the first half of 2021
WHAT TO EXPECT IN THE YEAR AHEAD?
2020 is history. In the past twelve months we have seen more significant, world-changing developments than anyone could have imagined.
The start of 2021 promises to be eventful, as the U.S. prepares for a presidential transition amid the ongoing battle with COVID-19. Many investors are wondering if the new year will be challenged by more uncertainty and volatility stemming from the effects of the pandemic. Others wonder about the future direction of policy with a new presidential administration and the potential implications for the U.S. economy.
Join us as Lion’s Wealth Management’s founder Nathan Krampe, CFP® wraps up 2020 and explain his market outlook for 2021.
KEY HIGHLIGHTS
♦ The business cycle, liquidity, valuations, and other factors likely to influence asset prices.
♦ What the Georgia Senate runoffs and the presidential transition could mean for the economy.
♦ How monetary policy, the economic reopening, and inflation could affect the outlook for markets in 2021.[/vc_column_text][vc_empty_space][vc_column_text]
Listen to Podcast Audio
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Well, I think we should get started.
I think this will be really good to do.
Well I want to welcome all of you to today’s presentation.
Lion’s Wealth Management, what to expect for the economy and the markets.
Now we have a lot to get to.
My name is Nathan Krampe.
I’m the founder and lead wealth advisor here at Lion’s Wealth Management.
With a lot to cover, we have a lot going on and what I want to do is take a little time to dive into details about the economy, the stock market then ultimately what that means for your portfolio and your investments.
That’s one of the areas that I work with here at Lion’s Wealth is the investment management, the other pieces of the puzzle revolve around the advanced planning. and that comes into details of the wealth enhancement.
What we do to try to do tax mitigation, wealth transfer, making sure the money that you have is going to the correct people in the corrected time with the least amount of tax impact.
Wealth enhancement, wealth transfer, wealth protection and then the last part of it is charitable gifting.
So with that I want to dive into details here with just that one piece.
What to expect for the coming year.
Now when we take a look at things here, this is just the legal note.
Basically all this says is that with everything that’s going on, this is just educational only and this is not advice that I’m giving, so just be kind of aware of that as we’re going through these things.
What do you expect?
Well, let’s start with this slide.
This is one of the most descriptive slides.
Descriptive pieces of information that I can give you about where we have been over the last year and where we’re going.
You see what this is talking about is the fact that we’ve had a lot of disruptions in our supply chain.
So much so that we’re at a shortage of not only container ships, but the containers that go into the container ships.
See what’s happening is that we have a lot of ships that are being sent over from China to the US, filled now that is being dispersed around the country, all those containers are being dispersed with goods and raw material, but we can’t get them back to the boats fast enough to get back to China facet to get fill.
So they’re going back empty to China and they need to be filled, but that’s not happening in the same way, so there’s a lot of companies that are doing well because they have worked with supply chains, and there’s a lot of companies that are not doing as well and this is one the tell tale stories of 2020 and what will be to come as well.
So I wanted to kind of start with that, but we have three areas that we’re going to be getting to today. The first one is lead stage two for the US economy. The second one is growth. And then Lastly we’ll be talking about inflation.
So with that, let’s dive in lead stage two for the US economy. And what is that? Why do we care about it and what was it going to do and affect you in your portfolio for the better?
OK so lead is a really good way of describing the economies.
There’s four different economies that we can look at and the lead is Lion’s economic activity and development.
So like I said, there’s four different stages to that for the economic activity that we’re seeing.
We have stage one over here.
With that is the best possible place to be in an economy best possible place for the economy, for growth?
And for stocks in assets in general, that’s saying that we have.
Well, we have growth happening in our economy and we have really no inflation to be had.
So that is the Goldilocks scenario.
That’s the best case scenario for what we’re seeing now.
Close to that is then lead Stage 2.
So the Lion’s economic activity and development stage two.
This is a very good place to be invested as well and what this is saying that we have growth in the economy.
But we also have inflation.
Well, there’s two other areas we have lead 3 and lead 4.
Now Lead 3 is saying that we have no growth to speak of or growth is even slowing and we have inflation.
Well then lead 4 saying that we have growth slowing.
We have no growth or slowing growth and we have deflation that’s happening.
Both of these are not great places to be invested and I would expect that stocks and assets in general would struggle in something of that manner, so that’s kind of the pattern.
What we’re talking about right now.
Where are we?
Where are we today?
Well to see where we’re at today we want to go back to where we were, and I have a lot of charts and graphs that look like this, so I’m going to try to speed through some little bit quicker and others.
I’m going to take a little bit of time with, but for the most part I want to spend a little time to answer questions as well.
So I want to be able to get through some of these slides and then others.
I’m just going to skip over if we have already talked about them or they’re not going to be applicable.
Kind of for what we want, but.
This one is actually very applicable and what this is showing is that in the second quarter of last year we were really really bad in our economy and we were in lead four at that point in time.
We were in a place that we had no growth.
We had slowing growth.
And we had deflation that was happening and so you can see that we had from where we were.
We had a very poor time but we had coming back.
We had kind of a stagnation of the growth happened in the third quarter and some of fourth quarter.
But then what you can see here is that we’re actually think I’m going to have some very very good growth.
Comparably from last year to this year comparably to count.
So that’s kind of the expectation there and you can see kind of the same similar pattern with inflation that we’re seeing.
So I’ll be talking about this more, but that is one way of describing and looking at it.
This is another way as well, and this is from a company called Hedgeye Risk Management and what they do is take a look at just that aspect.
The risk and they want to know what is the risk out there?
And they talk about the leads in the same way, and they want to know of where we are going.
So this is from June of last year and what you can see here is that we had a very, very poor quarter.
We were in one worst economic quarters we have ever had.
So.
Their thoughts.
From being the worst economic quarter that we have, the worst thing of course that we ever had going from there.
We kind of rise back up and we would come back into a little bit of growth.
Well, that was what they thought back then.
Back in June, but what changed?
See, they’ve changed their thoughts and the thoughts of many individuals have changed because of one thing.
Well, we kind of know what that is.
It’s a vaccine.
We have a vaccine now that we didn’t know.
Back then.
We have a lot of positives that are happening now that were not happening back then and so look at this.
This is the same graphs that they have published, but this is today.
This is just as of about a week, week and a half ago, and you can see that no longer does the.
4th it in the second quarter of last year.
Good.
Even resonate on this map.
Here what they’re showing.
But look at this instead of having just a small little bit of growth that has happened that they’re expecting to happen, we have a very significant amount of not only growth, but inflation.
So things have changed over the less even just month and 1/2 as to the expectations for the coming not only quarter for first quarter of this year, but also for the second quarter as well. And you can see that the second quarter doesn’t even resonate as how much growth they’re anticipating that we’re going to be having in our economy as well as.
Inflation.
So going back to things.
Where does that leave us with what stage we’re in right now, and the stages and expectations well?
Because of the growth that we’re having and also the inflation that we’re having, we are in lead too.
What that means?
That we have a great place to be invested.
This is going to be a great place that we can be growing in the stock market and taking advantage of everything that we have with respect to growth with the investments and with a lot of things that is happening.
So.
If we’re in stage two, if we’re in lead stage two, we’re expecting growth in our economy growth, stock market growth, and inflation all.
Those things what happened?
Yesterday what’s happened this week?
Because it’s been a very very interesting week with respect to the ups and downs of the stock market and well, basically it’s the fact that not everyone believes that we’re in this lead stage.
Two with growth in our economy and growth in the stock.
OK, there are actually a number of.
Hedge funds out there and institutions out there.
They think we’re in this category.
Lead stage three that our economy is not growing and that inflation is still obviously running rampant.
But what has been happening over the course of the last couple of days is a fallout from the poor thoughts of these.
Hedge funds
And what’s more, so been happening is that they were betting that certain stocks would go down in price.
And So what they would do is they would bet against those stocks.
So if the stock went down, they made money.
Well, that was a great thing to do for some of these, but what ended up happening?
Well, there was a bunch of chat rooms, chat rooms on the Internet.
They all got together and millions of people have gotten together and said, you know what?
Let’s start investing into the same stock.
At the same time.
And they chose some of the stocks that these hedge funds were betting against.
Now, not only did these hedge funds bet against these talks, but for every dollar maybe you could get a dollar worth of stock. The bet against him, but then they decided to leverage up so they put pay a dollar. They get a dollars worth of stock, but then they would borrow another two or $3 worth of stock or another.
Three or four shares worth of stock for that, $1.00.
And so at some point they need to return back those shares an if they if the stock went down they made them money and everything was good for them.
But what happened was some of these shares now because of the chat rooms they were going up.
205 hundred 800% in a couple of days. And so these hedge funds basic.
Blue
We had to hand back the shares, but then they had no way of recouping the losses, so they had to keep selling everything that they could. And we’re not just talking maybe, say, a couple $100,000 worth. We’re talking billions of dollars of worth, and so in just a matter of the last 28 days. Some of these hedge funds have gone down 4050%.
Of their you know assets and just, you know, just a zero alone.
But more so just seem in a couple days.
So what has happened recently is that a lot of hedge funds thought we were in a different stage from what we are in and they had to.
Basically, unwind everything and some of them, even self imploded so it’s not a great place to be, but knowing where we’re at that we are in a growth mentality for our economy as well as some inflation that leads us to say don’t try to bet that we’re going to be gaining money by betting against stocks.
So that’s kind of where we are at in saying that these hedge funds were a little too optimistic about where we were in the stock market going down.
And that’s not the case.
And so much so not the case.
I have another chart here that this goes back to.
Basically well to algebra, so maybe 7th grade or eighth grade for some of you and what this shows.
Is when we talk about division. So again when we go back to algebra we have the numerator numerator and the denominator. We divide the two together and that kind of gets our answer. So give you an example. If we have 4 / 4.
That equals one, so we call that our base case.
Well, if the top number is more than four, well then the our answer is going to be more than one.
However, if the lower number is greater than the top number, well, then we will actually have a number that is lower than one.
That’s just kind of math, but they took the same exact concept and they made it into the stock market and kind of put that through to the stock market.
And this chart is from a company called All Star charts that works with myself in other institutions and provides that type of information.
And So what they did.
I said, you know what we are going to actually divide the stock market of the US by the bond market.
And we can come up with some ideas as to where things could be heading.
And So what they actually looked at is in specially the technology and the NASDAQ, which is a part of the stock market.
That’s one of the more growth oriented parts of the stock market, and I said, well, if we divide the two by the bond market.
If this is going up.
And value as you can kind of see what is.
That means that the in this case the NASDAQ, the technology related parts are doing better than what bonds are.
And so this is something that if we are to grow more and more of the stock market.
We would see this happening.
Now the opposite would be true if people are getting scared.
If they’re really wanting to be buying more bonds, we would actually be seeing the bond prices themselves go up and then they would start kind of doing outperformance of the stock market and actually start reversing.
We started seeing this going.
Down.
So bonds would be doing better.
That’s one way we know that.
Right now we are not in the economic stages that some of these hedge funds were thinking about.
Because stocks are going up an relative to bonds.
No one wants them.
No one wants the bonds.
And you can see that in other areas they did the same thing for gold. They did the same thing for bonds with respect to the S&P 500, they did the same things with commodities. All say the same story.
That we are growing as an economy.
We’re growing as a stock market in our country here and that the level of fear that’s out there is not enough to say purchase more and more bonds and have a sell off in our stock market.
So it’s quite interesting what they can go through.
So as we are going through this, I want to take, you know, a couple of seconds a little bit of time, answer questions that we have as well or any comments.
So I want to take a minute now.
Feel free to unmute yourself and you can actually jump on and ask questions about this, or even tell me if this is the same thing that you’re seeing as well.
So I’ll take it one minute and then we can move on.
I mean, you can actually pop into the chat room as well too, and I can answer these questions while we’re going.
So as you have thoughts, feel free to do that.
OK, well while we’re again getting queued up with any questions that you have or any comments on kind of what I’m seeing here and the things that we’re seeing for the economy, I’ll continue on and then I can come back to these here as well, so.
We talked about defensive versus just growth.
This is just another chart related to that.
Where we have been though.
The fear that we see.
Well.
We have been very, very fearful and things been very volatile as we are well aware over the past year and so much so that we are in the 96th percentile for volatility now. Just couple times in history. Have we ever been that high? So here’s what this is telling me.
Last year was a really, really bad year and so much so that if you measure it on between a lot of other recessions that we’ve had, this was the in the top 10 for the most volatile year ever.
So we have the top ten years. This is one of ’em. Now if we take and that’s just taking a look at, say, a 1% movement in the stock market. If we take that an add in all the two to 10% movements that we had last year, this is meaning that 2020 was one of the most volatile periods ever.
For the stock market.
So we go back here and saying that we have had very, very active time.
Well, that’s true, and here’s what this is telling me though.
Can’t really repeat this.
This is not something that we can sustain them being this volatile.
And we don’t have much to go for up.
Now what happens though, if volatility or that fear starts to go down?
What happens if we’re not as fearful going forward as we were back in 2020? Well, you’ll start to see this go down for kind of the gauge. But then what that means is that as we’re not as fearful, we’re more willing to purchase more stocks and assets that are going to grow so.
That also means that the markets could probably grow a little bit more as well, and so when we take a look at the averages of all the different.
Recessions that we’ve been in how the stock market has performed.
You can see that this was a very, very quick.
Rebound in the stock market.
But the fear is still there, that volatility is still there, and if that starts subsiding, even just a little bit more, you can start seeing this really start to take off and grow more.
So there’s a couple of reasons to say that we have some growth possibility to come.
But obviously it’s not all good news.
I mean, we still have the virus out there.
The pandemic is still ongoing and we have new strains that are out there.
Variants of the virus?
Well, that is in kind of everything that I’m understanding temporary.
For the fact that the vaccine is working and the vaccine is being able to protect against most of these strains, and there are other boosters that are being developed just to protect against the new strains.
So all this to be.
Said
We are in a very good place to say that the pandemic is going to be behind us, probably over the course of this year.
And so when we take a look at things, that’s great news, but not for everyone is not great news for everyone.
And this is another just example of that.
This is the unemployment charts.
We had a massive just just decline in how many people were employed in our country.
And then we had a steep rebound as things reopened.
Which is to be seen, but going from getting everyone back to normal back to fully employed.
I am really not seeing that happening fast.
Now the reason why I say that is because of the fact that we take a look at things when we take a look at what’s to come.
There’s a lot of things that are changing in this world and give you an example.
Today this morning, GM, the car manufacturer GM, they came out and were talking about the fact that, well, they’re going to be transitioning away from gas powered vehicles to all electric.
By 2035
Well, that’s great news.
There is however though.
This is going to be.
Huge job opportunities.
But for the right people and the thought process that I have is that when we take a look at who’s going to be involved here, who’s going to be wanting and needing these jobs are not the same people who are qualified.
To be working on these jobs, you see, there’s new battery technologies that are going to come out.
New solar technology.
All of these things are going to have to be coming out and being invented, and the people that are unemployed now most likely don’t have the skills to be employed in these positions in the future, so.
This unemployment maybe systemic, and that’s something that we are going to have to work with not only on the local level bond and federal level to try to figure out how to make and help these people get employed again in a way that they can be.
Not only you know, working and feeding their family, but that they can be contributing and helping and doing some of the.
Really great things of the future and working to produce some of the great technologies of the future.
So that’s kind of thought process there is that this is going to take a while and it’s not going to happen overnight to get the rest of these people back employed.
But when we come back to it, I’m going to skip over some of these slides here.
This one is just showing kind of the revision of just earnings that are happening right now, but this slide is a little bit better to show that.
This is the thought process in the blue is signifying kind of where.
We actually can be going with the earnings of the profits. The earnings of companies and the expectation is they’re going to be more profitable this year than last year. More profitable this year than 2019 even. And look at this, you can see the trend.
In the this case, the trend is your friend, and when we take a look at something like this, let’s say there were more profitable today than yesterday.
For earning more money, that means the shares of the stock are worth more or people want them more.
So there’s very good evidence to believe that the stock market, and subsequently a lot of the different investments that urine can have room to grow just because of the fact that we’re going to be more profitable.
And we have a lot of positives.
They’re coming out this year versus even just last year.
The last thing to know is that we have a lot of spending that has yet to be done with respect to our federal government, and a lot of it comes back down to what we were putting in place last year for the pandemic.
That has not worked his way through yet, and so on average. Sometimes you know it can take longer, but on average it takes over 200 to about 250 days. So almost a year to put all that money that was printed in the debts that we accumulated over the last year into action.
And so that also is saying that we have more spending to come.
But then we have more stimulus as well.
We’re right now talking about adding another $1.9 trillion stimulus package to help fight the pandemic and to help the unemployed and provide some assistance, which is all needed. But then you also have.
Jay Powell
Coming out and talking about ways that he’s going to continue to try to be purchasing bonds and trying to help the economy in that standpoint.
Then you also have our new Treasury Secretary, Janet Yellen, who by the way used to be the federal chairperson, federal chairwoman, and.
They are very good and at talking and working on these things to try to help the economy to grow.
But the other aspect here is that.
They are scared.
Scared to death.
What happens if they stop spending?
If we stop spending in our country.
Well, that means that our bonds are probably not going to be worth as much.
That means people are going to be having a harder time than what they do.
You know ’cause we’re not going to giving them a stimulus package of paycheck unemployment, things like that, and that alone is a very very bad thing for very poor people.
The ones that need it the most and so that can really derail us.
So the expectation is that not only is this the thought process is coming into this year, but we’re going to have a lot more spending happened this year.
Just because of the need is still there.
Well, that leads us back to saying that yeah, we are in right now.
Stage 2 lead stage two for our country.
Well, again, pop questions into the chat.
You have the ability to come on.
You can ask questions.
You can stop me and we can have a dialogue about this as well as you have questions, or even if you’ve been seeing this happen in your own personal life or or things of that manner as well.
So just be knowing that they can stop me anytime here.
But let’s talk about this global growth.
We talked about the US. We talked about the fact that we are growing. We’re in the lead stage too. But what about the rest of the world?
See, that’s going to be vitally important to know going forward to where the world is going to be, because that ultimately is now in tandem.
We have a lot of globalization going and we need to know where the rest of the world is.
Well.
There actually having a rebound in not only growth, but manufacturing the same way that we are here in the US.
So this is a chart from Fidelity, and they’ve put together the details is showing that not only is the US but China, Japan, we have Korea, this is South Korea, Germany. A lot of the European Union here. All of these countries are having this massive rebound in manufacturing.
Fantastic news, it’s great to grow their economies, but coming back to this, this just statement is the fact that we still have supply chain shortages, supply chain issues and disruptions.
So this is going to be saying that we are going to have some countries even.
Not just some companies, but some countries that are going to do better than others as we can continue to figure out the supply chains more and more.
So what countries are they?
Well.
Going back to what we talked about earlier.
We talked about the fact that we can divide the stock market by the bond market and use that as a proxy for kind of thoughts of if people are very scared.
And wanting to have more kind of protection, more safety Nets.
Or if they’re going to be growth oriented and wanting to grow their accounts more.
We can do the same thing for countries, so going back to All Star charts, they put together a chart that took a look at other countries, but this one in particular caught my eye.
This one is just emerging markets emerging markets.
Divided by the US stock market and what this shows is that basically over the course of the last two decades.
It’s actually been a lot better place to be invested into the US stock market then.
Or merging more.
Kids.
And we’re talking China we’re talking South Korea, Brazil, Russia, India and other countries as well.
It’s been better to be invested into those.
Into our country versus those countries.
But here’s the thing that’s starting to change. And yes, you can give to squint to see it. So if I understand that this is not a massive deal, but this is a basically A2 decade, over 20 years time frame. So this change that we’re starting to see here is starting to show that.
International and right now this chart is just emerging. Markets in general are starting to outperform the US stock market.
Well, that is also coming back to what we’re talking about with the inflation.
I’m going to cover that here in just a little bit, but when we take a look again at the emerging markets they have done really nothing for almost two decades.
So they really haven’t done much in the stock market themselves and the US has been an incredible place to be invested.
Yes, we’ve had some hardships ourselves, but more so we have had a lot more growth here locally than what we have had around the world.
That’s starting to change though, and one of the best opportunities that are starting to emerge is China.
I keep talking about that and that’s been a story for a while, but they are now the second largest economy.
They will overtake us at some point, but up until now up until last year, the stock market, the technology sector of our.
Economy of our stock market in general, the NASDAQ has been one of the best places to be invested in the entire world.
But what we’re starting to see.
Changes are happening and going back to how we take a look at things here is that we can kind of take a look at where these.
Stock markets are going and this is kind of all encompassing of all the companies that are part of there, but it’s starting to say that.
The China’s technology is starting to outperform the stock, at least is American technology.
And the NASDAQ.
Well, that’s also important to be paying attention to.
Now, I’m not saying that we can’t grow as the stock market that we’re not going to be doing well, but what I am saying is that there’s going to be a lot of opportunity.
Is outside of the US to be invested into and China just happens to be one that we’re considering.
No, this is very evident here.
This is again going back to Hedgeye risk management.
They put together a slide here that just shows the expectations for the lead stages for not only.
This quarter.
The first quarter of 2021, but also the second quarter and you can see all the green you can see. All the twos lead stage two is.
Across the world.
So this is not just a US growth that’s happening. This is a world growth and this doesn’t happen like those very often that we have.
Synchronized global growth happening.
And more importantly, when I talk about emerging markets as well, you can go back and see the same thing that we take a look at all the emerging markets.
And they all say the same exact things with respect to global growth and lead stage two.
So you have growth and we’re going to have inflation.
Now again, I’m going to talk about inflation here in a minute, but that also goes back to saying that there are plenty of places now that we can be invested internationally, and it may be actually something that we want to be moving a little bit more money internationally to capture some of that growth.
Again, the recovery cycle is happening, it’s just getting started in some countries and it’s been farther progressed in others, but that just also just goes to show you that there is a lot of room to continue to keep growing over the course of the next number of years.
So that’s just something to know that we have a lot of room to grow in our stock market and our economy.
Well, again, I’m not going to go through all of these slides. This is just showing some more of China’s growth. The fact that the emerging markets may lead the US in years to come and then just talking about the economic kind of the good things to come with growth in a lot of the expectations for the world.
Not just the US.
And then like I said, the developing markets as well.
So that was.
What we were expecting coming into this year.
That’s the thought process.
Now that we’re going to lead stage two incredibly good for.
Stocks so a lot of small companies work well.
A lot of international stocks work well, but then commodity.
Yes.
Things that are going to grow up with inflation.
Those all do very well in times that we have growth and inflation happening.
Now that’s the first half of this year that I see that going on.
But the second half not so much.
If we take a look back to what the expectation is, that growth is going to be either.
Slower.
Or kind of stagnating.
Well, that puts.
US and the rest of the world pretty well into a different category, so when we take a look at what to expect for the second half of the year now for the rest of the world, as well as the US, we’re not going to be in lead stage 2.
Most likely will be a little bit harder to grow by being lead Stage 4 here in our own country.
Now this is thoughts.
This is not reality yet, so this obviously can change and the things that would make this change.
Well, we have a lot to do with.
Not only the virus going away faster than expected, we have growth happening, but remember I talked about Jay Powell and I talked about Janet Yellen.
They’re scared to death about having this happen.
They’re scared to death about the fact that we would go backwards in our economy, that things would get worse in our economy, and so they’re going to do whatever it takes and most likely spend whatever it takes to make sure that if we do go into lead stage four, that’s going to be very, very short lived.
So that’s the expectation there too, and whether it’s right or wrong.
Whether it is something that morally we agree with or not, and most likely is what it is and is what they’re going to do to try to make sure that they can help the individuals that need it most.
So that’s just kind of the thought process there.
All right, well, that leads to a lot of inflation, so we need to be talking about inflation.
If we’re spending a lot of money.
At some point in time, inflation starts coming and we have been spending a lot of money.
Now what this shows right here is that the balance sheets of some of the top central banks around the world has expanded and blown up by over $8 trillion just last year alone.
And so now we have added this massive amount of debt to all of our economies and this is taking a look at the UK, the US, Japan and then we have the eurozone in here as well.
Well, that alone and this is not even taking into account China or a lot of the other Asian countries.
Which is, this alone is signifying that we have a lot of debt out there and we’re taking on that debt by printing.
So that we can be spending and this is the same type of field this is going into the Pandemic emergency plan. In Europe we have the same look here in the US as well.
But all of these countries are spending in the exorbitant amount of money to try to make sure that they’re taking care of their citizens and trying to get their economies back up and running in the midst of lockdowns.
So again, I can’t say it’s bad.
What I am saying, and this chart kind of says the same exact thing, just in a little bit.
A different way, I guess, is that we have just blown up the amount of debt and the amount of spending that we’re doing.
At some point.
Inflation is starting to happen.
And you’re starting to see it right now, and you know you can say there’s a lot of things that are seeing inflation.
I mean, we have housing that is really starting to spike, and the prices of houses are going up the raw goods that go into it are really starting to go up as well.
So lumber is a huge deal.
Then we started seeing things that are not part of housing, but part of your household.
So food is one of those massive deals that we’re starting to see a huge increase in the price and I was just talking to someone.
She lives down in Texas.
She said that a year ago she could buy a loaf of bread for Dollar 50 today that same.
Loaf of bread is 420, five, $4.25 and it used to be $1.50.
And she has four teenagers.
And so she’s just, you know, I mean, her food bill has just skyrocketed because of this and those types of things we’re starting to see more and more.
The spending is starting to happen and again going back to kind of what we were talking about.
That when we talk about demand versus supply.
We have supplied, even if that stayed the same, but the demand has changed.
Or, worse, the demand is staying the same, but the supply is going down.
Well, all that leads to a higher price and that is inflationary.
So there’s a lot of inflation to come.
Not only food things that we use, but on a federal level and worldwide levels.
While we’re starting to see the exact same things.
So there’s a lot there. And then when we take a look at the policy, the fact that we are spending a lot of money, the fact that we will have another $1.9 trillion stimulus plan, most likely in one way shape or form, the fact that we are going to have an infrastructure plan coming after that.
And then that’s on top of any other stimulus that may be needed this year on top of any other stimulus that other countries are doing.
You can start to see that this is a very, very inflationary policy that us and the rest of the world is doing.
Well, we take a look at other demographics that’s for age.
Does not say more.
Inflationary deflationary is kind of is what it is.
But the other thing globalization.
This is another key aspect to why there is going to be inflation happening you see.
Going back to China and you know, we can say what we want about them, but they have a lot of people that are coming into the middle class.
There’s a lot of people that are coming into the middle class and what that means.
They are starting to eat more protein.
Well, that’s in the form of beef that’s in the form of chicken.
A lot of different types of animals.
Well, what that also means is that not only do we need to have more of that, But then we need to feed them so they’re they’re needing more corns and grains and things to feed the animals for the dinner table well.
Where are they going?
Right?
Lot of it’s coming from us in the US here, so we are exporting a lot to them. But what that also means is that the prices that were paying are going up.
Because of that, because we’re exporting more and more an, we may not be able to produce as much or right now coming back to what we’re talking about with respect to supply chains.
Well, that’s another.
Hard piece of the puzzle to solve.
And then the other thing that we’re getting from them is technology.
A lot of it, from Korea.
A lot of it from China and Japan.
Well, there’s a lot of input goods that are going into it that are going up, specially the all of the heavy metals that go into batteries.
Well, batteries are going to be the way of the future and we need all these heavy metals.
There’s a lot of rare earth companies that are in China and they have a lot of control with those rare earth companies that go into the raw goods that make the final product that go into batteries.
So there’s a lot to be said that globalization is a good thing in times.
So there’s also going to be some things that are going to be happening surrounding that that is going to cause more inflation.
Well, the last part of inflation is the fact that we have a dollar that is kind of dying a slow death an this is again from hedgeye risk management.
They over exaggerated slightly by saying that it’s the death of the dollar, but when we take a look at expectations, this is kind of the growth of inflation where we’re at.
We took a look back to.
The dollar and what the dollar does in lead Stage 2.
An we have lead stage 123 and four and in stage three and four the dollar goes up in value.
In lead stage two, a lot of times it declines in value goes down.
And when we have a decline dollar meaning things are worth less.
Extremely.
Where are the dollars worth less today than it was yesterday?
And we have commodities.
This is lead stage 123 and four.
Stage lead stage two is one of the most inflationary periods for commodities.
So if commodities are going up in price, but the dollar and the money that we have.
To buy those commands, they’re going down in price.
Well, that’s the perfect storm to say again that this is inflationary.
And then, Oh yeah, going back to our supply chains.
How that has disrupted things?
But this is getting solved, so this is not going to be an issue.
Probably closer to the latter half of this year with the supply chains, but it’s a big deal.
The reason why there’s a distinct difference in price.
So when we talk about inflation.
There’s great ways to be invested into it.
Like I said before, commodities and energy are going to be too.
Two ways that you’re going to start seeing no no inflation happening. Growth happening in those. The two ways that we can be invested into that and have them start to be another asset that we can be invested into as part of your portfolio. So we have stocks in the US we have international.
We have commodities.
We have enerji there’s a lot to do when we’re in this type of environment.
With the stock market.
OK, so we’ve talked about a lot. Actually today we’ve talked about the fact that the US is in lead stage two. We talked about the global growth that globally we are in lead stage two and we’ve talked about the inflation. But all of that leads to same. Well where are we going? And I’ve highlighted this but I just want to come back.
Circle back around to it.
That right now we’re in that really good setting, the same that we’re going to be growing as an economy.
We have some inflation and we can take advantage of that with your inve.
So we don’t need to be like some of those other hedge funds that have blown up in the last couple of days by losing 40% of all their money just because they decided that they didn’t take it, they didn’t know this and didn’t care about this. I thought we were in different.
Economic time frames and what we are.
But then also remember that this is for the first half of the year and the second half of the year is going to get just a little more rocky.
I think that we have a very short stint in lead phase four, so deflation happening as well as the slowing of our economy.
But remember.
I do expect when we talk about the balance sheets, talk about expectations.
This is going to be short lived because I do think that the people that we have in place that are making policy for us won’t let us stay there.
So that’s.
My observations and I want to kind of end with them.
Thank you for everything for just being here, being in attendance and just again as we talk about investment management.
That’s just one piece of the puzzle of the entire wealth plan that encompasses the advanced planning and working with all the different areas of your financial well being.
And then working with the other.
Find out people that speak into your financial life.
All of that culminates into what we do here at Lions wealth.
So with that I’m going to open it up to questions.
So I’m going to stay on here.
You’re welcome to either put them into the chat or you can speak and I’ll.
I’ll start answering some of the questions, or even some of the comments that you have.
So with that, thank you so much for your time.
You know one of the things that.
I’ve been getting a lot of questions on.
Obviously, is that how do I know I’m right that we are in the lead stage two versus stage four or stage three, that some of these hedge funds are thought and going back to that one chart?
That I was talking about here, kind of.
They kind of scroll up and.
See where we’re at here?
The one that I was talking about right away early on.
Kind of expectations for inflation.
There we go.
The expectations for the growth and what people are expecting versus the bonds.
And if we do.
Start going into the lead stage four so the in our economy starts going backwards.
We’re going to start seeing a lot more bonds be bid up and actually start gaining money and this is all going to start changing, so that’s another great way to know that as of right now.
That we are in a good place.
Question.
Is this more common things?
And thank you for all the research and study and keeping us up to date.
And this is something that I love to do.
I have a lot of people involved to put this together and making this happen so I’m very appreciative of all the different companies and all the different people that come to this research to get to this place.
OK, with that I’m going to sign off.
Thank you for.
Being a part of this, feel free to email me.
Any questions you have Nate, Nate at lionswealth.com would be more than happy to answer your questions as they come up. And also if this is of interest to work with us as part of not only the investment management piece, but diving into that advanced planning, I’d be happy to send you more information of what that looks like and how to do it.
Take care, have a great rest of the day.