This Is What "ALWAYS" Happens Before A Recession

[00:00:01] The economy is sending a lot of mixed signals right now. You have the stock market and crypto down and now back up. You have Walmart lowering prices to attract squeezed customers. And, you know, you have a line out the door at Starbucks every morning. So what is hype and what's happening in the real economy?

[00:00:20] Yeah, I'm telling you, it's confusing right now. I mean, I just watched a video this weekend about, you know, how how badly has Trump damaged the dollar? Right. Like, that's a real concern. You know, now we have these countries that I think I don't think we can underestimate the the safe haven of the U.S. dollar. Right. And so we have that as well. And of course, the tariffs, we need a bit of those.

[00:00:48] Oh, absolutely. You know, I think it's interesting, you know, that we have these contradictory consumer behaviors. You know, you have Walmart lowering prices yet. You have people, you know, you and I went to a restaurant, two restaurants this weekend, Friday and Saturday night. You know, we couldn't get reservations into either one days before we had to call the people we knew to get us in. And, you know, that's not recessionary, a recessionary economy.

[00:01:15] Sometimes I wonder if we're just in a little bit of a bubble, you know, like like, you know what I mean? Like Scottsdale is I was just in Miami last week for a YPO conference. And, you know, however, you know, you take a look at what's going on in that South Beach. That area is down. So the real estate's down. There's there's lots of restaurants. I was eating with a bunch of locals and they said there's a lot of restaurants that have gone out of business.

[00:01:45] So, you know, we are seeing what we're seeing here. But I think the consumer is getting whacked personally and it certainly is showing up. There's a lot of kind of silent layoffs happening right now. And by the way, AI, this this conference I was at was a marketing conference. And we had some really, really big, big people there like Spotify, Athletic Greens or AG.

[00:02:13] These are some some of the best marketing people in the world. And we have lots and lots of agencies are are moving away from, you know, content writing and things like that. And they're moving into chat, GPT and AI for a number of things. Yeah, no, I would agree with you. But I still think consumer behavior, you know, it's interesting because, you know, we haven't been in a downturn in such a long time.

[00:02:39] People are very used to spending. Right. So there's certain spending habits that, you know, people aren't necessarily changing. Well, that article you sent me last week about the pay later stuff. That's very interesting. So so you guys probably know the there's Apple Pay and there's Apple Pay later. And there's all these different kinds of programs out there like Flax.

[00:03:02] We use Flax for our rent where, you know, they the Flax will pay our rent and then they'll they'll go after the consumer for payments. Essentially, people are doing this with groceries. And this is hopefully this isn't new for information for a lot of you guys. But you start to see these things when when people are starting to use Apple Pay later for groceries and and those kinds of things. And now they're starting to default.

[00:03:28] So I think didn't you say 40 percent of the people on some of these programs are actually delinquent or late? Well, yeah, in the past year, they've been delinquent or late. So that's up from it's at 41 percent up from 32 percent last year. So just look at the waterfall there, though. Right. Because remember, one, I guess, pay cash to pay on a credit card, three finance a purchase over time, just kind of like a credit card.

[00:03:56] And when it starts to move down the line from, you know, I guess like a vehicle to to food, it's a very, very different scenario or rent. It's a very different scenario. We've never I in my life of have ever having all the real estate stuff that I've ever owned. I've never seen a program that finances a tenant. Right. And those are new.

[00:04:22] And so, you know, and that's a direct result of of the economy growing faster than wage growth. But I also think it's cultural, too. I don't just think it's that I think that it's people want what they want and they're going to buy it. And I think that they don't care if they have the money for it. And I don't think that it would matter if they made 20,000 more a year. Yeah. Credit card debt is at all time high. That's true. And savings is at an all time low.

[00:04:51] You know, it's funny. I was having this conversation last night with the guy sitting next to me at that dinner we were at. And, you know, I was saying, you know, Trump is trying to get really good jobs back into this economy. And he's trying to make it so that you make better wages and you can buy things like a home and you can save money and you can invest. But at the end of the day, you know. So. In order to do that, the price of stuff has to go up if we're going to make it in America, it's going to be much more expensive.

[00:05:20] Right. And I was talking to him like, I don't know if people want that. Like, I don't know if, you know, that people want. OK, you don't won't spend your money on frivolous things. And now you can make enough money to save and buy a house. But yet you can't go shop on Shein and all this stuff and buy a different outfit every week or buy, you know, multiple like random things. Right. And I just don't know if that's what people want in this culture. I just think people would rather buy stuff all day long and rent than be, you know, buy a house.

[00:05:48] I mean, I was thinking about like I get the made in America thing and I get the reason for the tariffs and all that. And I know super controversial. I get all that. I don't know how it's going to end up, but definitely I know some people just don't think it's going to be inflationary at all. I just don't see how it can't be like, you know. But regardless of that, you start to look at these, you know, call these international websites.

[00:06:16] Right. Like Alibaba and Amazon. You know, people were already buying stuff from out of the country. It's going to be very interesting to see how all this is going to going to play out, you know. And also I saw this report about the amount of money that it spiked like crazy that that the customs is getting now for stuff coming into the U.S.

[00:06:42] It jumped like crazy, like, you know, it's at an all time high already just for the month of April. And so we're already seeing that kind of revenue hit. And it has to translate into higher price consumer goods. Absolutely. You know, and I think the big word right now is uncertainty. Right. Like everything's uncertain. So everything is frozen. So, like, we're not seeing much difference in the consumer purchasing from the tariffs.

[00:07:12] But you are seeing the fact that we could enter a recession. There's a possibility, even though the numbers aren't showing that yet. We might be in one. Yeah. I mean, we, you know, we have to see what the GDP growth is after this next quarter. We totally could. But but right now you're seeing the real estate market frozen in most markets. Like nothing's moving because I think buyers are wondering, you know, I don't want to buy right before the market tanks.

[00:07:39] Right. But then sellers aren't necessarily lowering the prices because they're not forced to sell anything. And then you see the same thing in corporations, you know, like no corporations expanding right now. Everything's just kind of frozen. I was talking to a commercial lender over the weekend and we were emailing back and forth. And I chatted with him last week and I said, what's you know, why aren't we seeing more defaults?

[00:08:04] And what he told me was that the first kind of stage is working with the borrower and, you know, what he called extended pretend. Right. And that can go on for a while. Now, he said, but that's now starting to be over. In fact, I'm going to call him today or tomorrow.

[00:08:26] And he said a lot of times there, you know, they did all kinds of things to not have them into default, technical default. Well, the economy hasn't gotten that much better. Right. And so so his prediction was is that you'll start to see some of these things emerge this year and next year as a result of, OK, we've kind of had enough. It's time to go mark to mark to mark on some of these deals.

[00:08:54] And I think that's so I think, you know, the the the first the first trotches. Everybody's trying to figure it out. To your point, there's a lot of uncertainty. And I think I just want to address a couple of things. I think that, you know, this this this dollar, the U.S. dollar is the world's currency. And, you know, it's that one it's at its weakest point right now.

[00:09:20] And so so if I'm if you're China and I'm buying something from you, I'm paying you in U.S. dollars. And if the dollar is getting weaker, you're looking at me going, well, why would I take those? You know, like the dollar is getting weaker. And so why is this important? It's important because our trading partners historically have the dollar has been a bit of a safe haven. And so this is a big issue. And so why is it important?

[00:09:49] It's important because this is precisely why I think that we're starting to see a run on gold, as an example, because there's going to be a flight to, you know, there's going to be a flight out of dollars. Maybe that may not completely. Maybe it's a short, short time. But we're already seeing this. I looked at gold's like up over thirty five hundred an ounce now. And it was it was like twenty five hundred not very long ago. Oh, there you are, Jerry. Thanks.

[00:10:18] Yeah. And what is that? Is that for a week or how long is that? One day? Go back to six months. Click on the six months up top there. And then. Yeah. So there you go. Look at that, guys. So take a look at gold. Can everybody see that? OK, great. So now this is I think this is a this is a flight out of dollars. And to your point, you know, what happens is when you start seeing other countries,

[00:10:49] you know, concerned about the safe dollar, you're going to you're going to see all kinds of of fluctuations like this and in other types of assets. So the question is, you know, will the dollar lose its reserve currency anytime soon? I don't think so. Personally, it takes a lot, you know, and obviously the is it the renminbi that in China, I think, is, you know, the one that everybody kind of moves to.

[00:11:17] But there's there's just no possible way based on the the I don't think a lot of people really trust the government. They don't have the rule of law. There's a whole bunch of things around that. So so people are frustrated right now and there's uncertainty. And I don't know if we can ever pull that back. And and this is an important thing because I think the U.S. has historically been a good trading partner. And I think that this is in jeopardy right now through all these kinds of things.

[00:11:47] Yeah, absolutely. And I think the next, you know, some, you know, the next. Rock to fall will be, you know, the decrease in staff. Right. So I think that corporations right now, a lot of them are doing hiring freezes, but we're not seeing a ton of layoffs yet. But if things don't pick up, that's kind of going to be the next step. Well, I think inflation, too. You know, there's the there's already indications that inflation is going to be a bit of an issue.

[00:12:16] Yeah. But you have companies like Walmart and Target coming out saying they're cutting prices on a bunch of their items. And Chipotle is coming out saying that they're not going to increase prices with the tariffs. So what that means is the corporations are going to be absorbing the cost. And if a corporation is going to be absorbing a cost, it's got to cut costs in other places. And I think those costs will come from staffing. Yeah. Yeah. They'll try to be all automated. I know the other day I was I can't remember where I was.

[00:12:44] I was flying through. Oh, I was on my way to Sedona. And I stopped because I got up early and I pulled into a McDonald's. I went in there just to just to get some hot coffee. And it was a kiosk. I was like, what? It was full kiosk. And and then, you know, so I think you're going to start to see more and more and more of this where, you know, that is one.

[00:13:10] Obviously, one way that food service could certainly be automated. Not completely, of course, but it's a big one. I want to look at the inflation trends, too, because I think you have a dual dynamic there. So you're having, you know, these larger companies are able to decrease prices because they have a hold on the market. So they're basically going to tell the company that they buy from. If you can't make it for X costs, then we're going to find a different company. Right. So they're going to give them that discount.

[00:13:40] Really, the small business is going to take a big hit, too, on their pricing, too. But these smaller companies, they're going to take a bigger hit because they can't absorb the cost. They don't have a big staff. So they're going to have to raise prices on the consumer. So I think you're going to you are going to see some things deflate and some things inflate. And, you know, the other thing is, is we have I have a ton of friends in manufacturing. And if you guys haven't gone out and looked at this, you should.

[00:14:06] But the way the tariffs are going to roll out, it looks like at least that's there's there's a lot of data around this is it's going to be they're going to put categories. The countries in the categories of green, yellow and red. So, you know, just like a stoplight. So green means that they're, you know, friendly with us.

[00:14:29] Right. Yellow is, you know, tentative and red, of course, it would be that would be like where China is, as an example. And so you're going to have different kind of measurements based on those. And so the reason why I'm bringing this up, if you just type this in, you'll you'll find it. There's tons and tons and tons of information on this, including some really, really good YouTube videos on which countries are going to go into those buckets. And this is apparently at the moment how these tariffs are going to roll out.

[00:14:59] Now, what that means is the manufacturers, some of my friends have already moved some of their stuff to like Vietnam, as an example, because they're in the green bucket. So if something is made in China, they might move it to Vietnam, as an example, because the tariff is going to be less there. So all this stuff is playing out right now, too.

[00:15:20] So if you're a if you're a business owner and you're you're doing business somewhere and your consumer is the U.S., you're trying to figure out right now, where can I have this made for as little as possible? And of course, Trump's trying to make it in the U.S., but there's all kinds of workarounds on this stuff. People are there's all kinds of loopholes, if you will, in the way the manufacturers are doing this, even on the luxury goods.

[00:15:49] It's where they're being made in another country, but being assembled, let's say, in France or in Italy or wherever it might be, even in the U.S. I have a manufacturing friend that's actually doing that. It's actually the parts are being made somewhere else, being shipped to the U.S. and that's being assembled here and then it is made in the U.S. So is it really, you know, do they put up they put a made in the U.S. sticker on it, but really the components are all over the place.

[00:16:16] And so this is this is what's being unraveled right now. I think something else that we can't ignore is the consumer behavior contradictions. Right. So you have line out the door at Starbucks, but then you have airliners lowering their ticket prices because not as many people are traveling. Right. And so you have to look at that. And I think what it comes down to is the widening class divide. So you kind of mentioned that being in Scottsdale. Are we in a bubble?

[00:16:42] You know, I don't think we're in a bubble, but I do think that you have, you know, a big gap between those that bought and owned pre-2021 and those that bought and owned after 2021 because you're rented. Yeah. Yes. But not just for real estate in general, because if somebody locked in a low mortgage rate, then the rest of this inflation they're more easily able to absorb because their house payment is so low.

[00:17:08] But if they're renting or they bought, you know, recently and they have a really high house payment and they have all these inflated goods, they're much more squeezed. Yeah. I think this is the time, guys, where you want to accumulate cash, in my opinion. You know, you want to have reserves because we don't know, obviously, where all this is headed. And to your point, you know, if not everyone is fiscally responsible, you know, we've we've seen this before.

[00:17:38] I mean, if you just look at the stimmy checks that people got, they were gone within two years. That money, if you just look at the savings rate before the stimmy checks, after the stimmy checks, and you see how quickly it peaked and how quickly it went away. Now, not saying that they didn't use them for things that they needed, obviously, because the economy was shut down, too.

[00:17:59] However, but the savings rate is a very, very the savings rate and the credit card delinquents and the credit card amount, which is well in the well over a trillion now, just past that, not even a year ago, is is out of control right now. And people are getting squeezed, but they're not changing their behaviors. And that's the issue. Yeah. And while he said, you know, we have been in a recession that said, we're approaching stagflation.

[00:18:28] I'm old, live through the 70s. One thing to have cash to buy at a high price, another not to have a job or money to buy necessities. So, you know, that stagflation thing could be a real thing. I mean, that could really happen. I mean, people talk about inflation. They talk about deflation. But, you know, if Powell doesn't lower rates and get the economy going, we could have stagflation. It's possible.

[00:18:55] And, you know, if we probably are going to see higher unemployment and we're definitely going to see higher inflation, in my opinion. So right to your point. Yeah. And if those two things happen, then we could see a real rally. I thought what was what was really interesting is the way Trump went after Powell this last week about lowering the interest rate.

[00:19:23] And, you know, he basically it's funny because he's he basically is looking for a way to get rid of him. Now, the interesting thing is Powell. Powell didn't back down. He just kept the rates where they were. Trump wants rates down. Yeah. But Trump walked back the statements that he was going to fire Powell because that would have been horrible for the market. Oh, it would have been. But what's interesting is that Powell actually gets Trump gets to appoint his own person in May of 26. So Powell's only there for, you know, call it another year.

[00:19:53] Then he actually moves, I believe, into being a governor. Right. So he'll still be on the board, but won't be in charge. But Trump's going to have his person in charge in a year. That's a really good, you know, point, because if Trump gets to pick his person and that person embraces inflation, because basically lowering rates is an embracement of inflation. You know, it'll be interesting to see.

[00:20:19] It's a good place to be at if you're in real estate or if you're in, you know, hard assets. And one of the reasons why he wants rates down, in my opinion, is because if rates go down, things will start to get consumed again. It'll help GDP and it'll mask what I think is going to be inflation that's coming from, you know, some of these tariffs and things that are in motion.

[00:20:47] You know, there's a lag to all of this. There's a lag. I, you know, I think with the real estate markets and like the bond rates are, you know, they can only do so that, you know, the Fed can only do so much for what the actual rates are depending on, you know, yeah, the 10 years. Right, right. Yeah, no, no, it's true. And I think that's the, you know, the bond market is actually something else that's extremely interesting. Most people probably don't pay too much attention about.

[00:21:15] But the reality is, is that there is a potential, and this is back to that dollar issue that I brought up before, that if there's a flight from the bonds, you know, it's going to be disruptive. It's actually going to, it's going to take a crack against the GDP, you know, because a lot of our bonds are held by foreign interests.

[00:21:43] And so I know one of the, you know, if this is confusing, I'm with you guys. I've tried to figure out just like you. What's really cool, Jerry, if you want to put up Limitless, guys, we are, you know, I got Jim Rickards coming this year, guys. So we haven't really announced it yet. You guys are the first to know. So he wrote a book called Currency Wars. He's written a bunch of books.

[00:22:11] He just, I just read the most recent one that's about chat, GBT and money, you know, and obviously we just raised the price for the Limitless Expo. It went up over the weekend. But because you guys are watching this live stream, we'll give you a last chance to lock in at the old price if you want. You can save over 700 bucks off a full ticket price. Just hit the code LASTCHANCE when you check out. And I'll see you guys in Dallas in July.

[00:22:40] But, you know, I'm in the process of confirming Jim Rickards right now. He's agreed via text and email. And that's going to be huge because this is a guy that really understands what's going on. You know, he wrote a book called Currency Wars. And I actually think this is where we're headed, you know, because if I'm a foreign country, the reality is, do I want U.S. dollars to be paid in? I mean, that's a real concern. Absolutely.

[00:23:09] So we've got Jim coming this year. It's going to be super exciting. So Wesley once is stating 40 percent on buy now, pay later users have reported missing payments in the last year. And then also student loans are coming to a head as well. And a lot of these people that have the buy now, pay later probably also have student loan. They could. Yeah. That's another one. You're right. Yeah. Trump's like you guys. Oh, right. Yeah. So that was another one. I'm sure it pissed a lot of people off.

[00:23:36] But so, yeah, I tell you what, all this stuff is kind of coming to a head. The interesting thing is, is, you know, those are the people that don't really have traction yet. Right. Like like a lot of these folks don't own assets. Right. And, you know, sometimes those those kinds of things can can save you and help you at least. Right. If you have something, if you're invested in hard assets and you have a lot of equity, at least you have that as a fallback.

[00:24:05] You don't really want to use it. Nobody wants to sell a home or an asset and scoop the equity to pay stuff. But, you know, that is the there's a big difference between, you know, most students that have student debt coming out of college, maybe just trying to figure stuff out and getting whacked by inflation, the student debt. And, of course, these these pay later things. And and I actually think this is all going to get even worse with with the A.I.

[00:24:35] and the, you know, the chat GPT and all that stuff. I'm telling you guys that the automation that's going on, like like we have full plants today. You go in, there's no workers there. It's all robotic. Right. All of it. So, you know, it's already here. Right. Certainly outside of the U.S., it's here. And so that's all coming.

[00:24:58] You know, when you can build a whole factory to manufacture things and you don't really need a lot of people, you know, we should be taking note of that. Absolutely. And thank you guys for tuning in and we will see you next week. Thanks, guys. Bye.