Key Points:
- Recession indicators: high interest rates, rising credit card debt.
- “Buy now, pay later” losing appeal as economy tightens.
- Politicians misread economic issues, wrongly blaming retailers.
- One of the best ways to protect yourself in a downturn is high-quality dividend stocks. Smart money is scooping up these two dividend legends before word gets out.
Doug and Lee discuss the potential for an impending recession, noting that the U.S. may already be in the first of two consecutive down quarters necessary to define a recession. They point out that many classic recession indicators, such as high fuel prices, are absent, but rising debt and dwindling savings signal economic trouble. The conversation also touches on the reality of high interest rates, especially on mortgages, car loans, and credit cards, and criticizes politicians for blaming inflation on price gouging by retailers, who actually operate on very slim margins.
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Edited Video Transcript:
Well, look, if you’re right, you’ve got to have two consecutive down quarters.
I suppose that there’s a chance that we’re in the first of those now.
Yeah, or close to the first.
I mean, we had an actual recession in 2022, and they didn’t want to talk about that because it wasn’t really a recession.
Well, yeah, it was.
We had two consecutive quarters of GDP, you know, less than zero.
And I think that we’re right on the verge.
And if we did get really honest reporting and it was 0.9, then you can bet that the numbers coming up in 2022, ahead of us for Q3, Q4, and into 2025, you can bet they’ll be lower.
Yeah.
And I mean, right now, some of the classic things that cause a recession aren’t in play, like high fuel prices.
But to me, the problem is, is that people have run out of money.
Oh, absolutely.
There was, everybody had, you know, the M2 numbers soared during because everybody got free money from the government.
Well, that money’s all gone.
And now we have a trillion dollars in credit card debt.
So, and I saw where, you know, one thing that became very big and it was from a company called Affirm.
And, you know, they would do buy now, pay later.
Oh yeah, I know that.
I remember that company.
And I remember that there was a whole, that industry has existed since the earth was just warming, you know.
Absolutely.
But it became really big, you know, two, three, four years ago.
And JP Morgan said recently, we’re not going to take any more of that business that, you know, buy now, pay later business.
They’re just not going to do it.
And because it’s one thing when you have a lot of cash and everything’s great.
But when things start to get tight, who wants to hold that, you know, paper?
Yeah, and there’s another aspect to this.
When people look at interest rates, people say, oh, the Fed’s going to drop down.
And that means that interest rates are heading back towards 3% or whatever.
But look, the real interest rates, there are three interest rates people really pay.
They pay their house.
And if you bought a house three or four years ago, it’s 3%.
If you bought it last year, it’s almost 7%.
It’s your car payment.
And new car loans at a bank right now are 6% or 7% if you have perfect credit.
And then it’s the massive amount of credit card debt you’re talking about.
I mean, people are paying 22% on that stuff.
So to me, the hidden part of the economy is what people actually pay in real life for interest rates.
Yeah.
And the thing that gets so tiresome from politicians.
It’s like, see these numbers, see these numbers, see these numbers.
Well, the average American, I don’t care who you are, when you go to the grocery store and you look at pricing that’s doubled and tripled from three and four years ago, and then they have the temerity to say, well, it’s all price gouging.
You know, it’s like price gouging?
The margins at Kroger are less than 2%.
They do it on volume and they do it on, you know, certain items where they have a bigger markup potential.
But to accuse big retailers of price gouging is like, uh-oh.
That means that you have absolutely no idea how to fix it.
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