Macro Regime: Heightened tariffs and policy uncertainty are driving volatility, with signs of a potential US recession emerging from weakening orders and labor pressures.
Consumer Pullback: Persistent inflation is hitting demand; examples like O’Reilly’s pricing pushback and everyday goods (e.g., beverages) show consumers drawing the line, risking margin compression and layoffs.
Housing & Homebuilders: Creative builder financing (low down payments, 7-year ARMs, vendor financing) is fueling speculation risk in US housing, posing potential issues for the Homebuilding subsector.
Banks & Credit: Sloppy underwriting, inventory/AR-financing frauds, and rising leverage highlight risks for Regional Banks and broader Financials; regulators struggled to track loan reclassifications.
Tourism & Vegas: A tourism slump is evident; Las Vegas traffic remains weak and prices high, pressuring Casinos & Gaming and Hotels, Resorts & Cruise Lines.
Quantum Computing: Government grants and potential equity stakes in small quantum firms raise questions about capital allocation and favoritism, while established players like IBM and Intel are noted.
Digital Assets: Stablecoins backed by U.S. Treasuries could become structural buyers of duration and embed banks in a digitized dollar system, though systemic risk remains a concern.
Market Structure: Meme stocks and record margin levels heighten fragility; precious metals saw an exhaustion move and pullback, underscoring speculative extremes.
Transcript
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The disciplined [music] investor is all about you, your money, and the markets. Sit back and get ready for this [music] edition of the disciplined investor podcast. This episode [music] of The Disciplined Investor is sponsored by Horowits & Company. If you're looking [music] for a portfolio manager, look no further. Horowits & Company. From seed through harvest, [music] cultivating financial success. >> It's time to tend to that garden. A little maintenance on the portfolio. October does what it usually does. Targets raised. Analysts are trying to keep up even if earnings miss. Our guest today, the Fed Watcher, Danielle D. Martino Booth. All this and much more on episode number 944 of the Disciplined Investor podcast. [music] [music] Well, you can tell it's October, can't you? I mean, the days are shorter. It's dark. It's dark when I wake up. How about you? It's very unsettling. It's nice because you could sleep longer. You don't have to worry about putting down the shades as tightly as you do or maybe even those uh curtains or the the blackout shades that some people have. I have some. They don't do all the job that it's necessary in the bright days of the Florida sun. But bottom line is we know a few things. We know that markets have tended to be a bit more volatile during October and that's what we've seen so far this October as well. Much of the added volatility, I got to tell you, has been, I would say, let me think, mostly, I'll give it 90% self-inflicted, self-imposed volatility due to the fact that we have this ramp up in tariff chaos from the White House. We have a government that is still shut down. We have speculative speculative frenzy that's gone off the rails and it's gently starting to see some calming as earning season rolls through. We saw the banks come out a couple couple three weeks ago and those were pretty good numbers. We saw the deal making uh investment banking really on a tear and the banks did really well. Very impressive overall. Then we started to see a few other things and the cracks started to form. We saw the Netflix, we saw the Microsoft, not Microsoft um well in the in the category of problems, we saw the stocks falter for Netflix and for example Tesla initially. We saw that IBM concerns about their Red Hat division and all of a sudden some of the chip companies are coming up and saying, you know, well, you know, we thought things would be really good, but we're really not making the numbers that we expected yet. And this is what we see. This is when we see what happens when the excesses start to run out a bit because first we see that ramp, you know, the crazy moves that we can uh probably look no further than some of the things we saw with Beyond Meats last week or some of the other meme stocks. And by the way, these meme stocks are often associated with companies that really should be delisted. I'll say it nicely. or maybe even uh the realization that these companies are going to be bankrupt one day, but they do have something that is just so exciting to those that like to trade these things and that is high short interest. And I I I wonder oftentimes, and I talked about it on DH Plugged this week, why it is that people are still shorting these stocks down at 50 cents. Yes, it can go down to 25 cents and that's a 50% return. I get it. And even from 25 cents, you can go to 12 cents and that's even another 50% return. But with some of these names, the risk is so outsized to the upside if it catches fire. Like we saw the 500% return on Beyond Meat that happened just this week, right? But you know, we do know that of course that trees don't grow to the sky just like we saw with gold. I mean, did you see what happened there? The fact of the matter is gold, silver, platinum, palladium, they all came back down to earth pretty well. Still elevated dramatically, but that run that we saw and that exhaustion gasp upward, it had to be rectified. We knew that was going to happen. So, where are we in this? where the quantum names, the five or six different companies that got all the attention of maybe one day, someday something's going to be great with them and and drove these names up hundreds of percents had this huge fall recently only to be saved, by the way, by a possibility of the USA, this happened Thursday, the USA taking a position in some of these names. Once again, we're at this juncture of our existence for maybe a $10 million grant or a preferred payment of some sort. That was the weird news that we saw that the government was going to get involved in quantum names that may or may not be necessarily have the goods. We have quantum with major companies like an IBM. Why aren't we talking to them? Why are we talking to these smaller companies that may or may not have something that are, you know, on the verge of are we all of a sudden a speculative engine hedge fund? Yeah, we want to make sure that we get these advances. So, I understand the opportunity to fund these companies and even grant them money and take back a little position on the company as repayment for something for the future. But who who's the play who are the players that are giving out this kind of money and and and doing this? These are hedge fund guys. There's Bent and and and these guys. And you have to wonder if there's an ulterior motive to some of this. But this is what happens when governments are involved in capital markets like we are seeing and not just necessarily with the Intels or um the other names that they've taken a piece of like the quantum that talking about right now or the MP materials right for the security and safety of the United States were taking positions in these companies. No, I'm talking about aside from that the quantitative easing, the uh the the the various forms of money transfer. I'm talking about the stimulus. This is what happens when governments are involved with capital markets. You can think back to the 2008 2009 period of time where markets swoon then went crazy all over the place because we had the heavy hand leaving their greasy little fingerprints over everything. And after that, post the resumption of okay, it's okay to get back in the market, there's usually this speculation craze. Markets are up and then they eventually fail. Same thing time and time again. We saw that same pattern by the way in 2020 with COVID. Remember this, right? Everybody was freaked out. Oh my god, markets caved. Government came in. Oh, you know, everybody's going to get all sorts of money and, you know, we're going to prop up the markets. We're going to drop interest rates to zero by the Fed. We got um, you know, an amazing amount of money is going to be transferred through some kind of payment program to individuals, to companies, aka stimulus. And that created a speculation craze at that point. The meme stock craze was kind of you know created then you know the names. Time and time again we see this. We go through the standard scurve of peak to trroth but also of emotional movement of it's never going to get better. Oh my god, things are getting better. Let's really get in there. Oh, it's never going to get worse. It's always going to be wonderful. Uh-oh. What's happening? I'm worried about this. It's never going to get better. It's ne, you know, that whole It goes on and on. There's nothing different. It's just different peaks to tr different wideness of the period is usually the only thing different is the height, the depth, and the length. Very simple, but they all look the same. So, where are we now? I think it's an important question to be asked right now. because I think we're past the time that we saw the stimulus phase, right? We got the initial lowering of rates. We got the big beautiful bill that created more money flow into the system and we're I think starting to get past the specul speculation the speculative phase. Speculation, that's both words together. Speculative and speculation. Um we're past the speculation phase and now the question is where is the rubber meet in the road? Right? Because this is a time where economics could matter if in fact we can get a report if the government ever reopens, where earnings will definitely matter. You have to ask yourself, what do you do now? Well, for us, it's harvest season. Pruning the garden. That's what we need to be doing. And we're looking for those overgrown areas. Think about a garden, a forest. Think about uh think about a vegetable garden. I think that's the best way to look at this. Flower gardens are great for diversification. Vegetable gardens we'll think about for pruning and for overgrowth and for picking those really ripe fruits and vegetables. That's where we are because, you know, if you don't do it, if you're a farmer and you let those those fruits stay on the vine, they're going to be either uh overripened, they're going to spoil, or they're going to get eaten up by the uh various animals and insects. So, what we're doing is taking the time to see where we could take some really juicy profits. And I can tell you this is exactly what we did. Some of the names that kept running and running over the past few months, we were targeting them for a trim. And we did. We've been trimming a little bit, but we took some of them entirely off the table. Pick the fruit and said, "We are going to bank that right now." And some of these are the names that we really think still have an opportunity, but we also think they're overdone dramatically right now. they're going to be out of season. So, these are the ones that also added some unbelievable performance to our portfolios. But we need to think about it, right? Right? What do you think about this whole this whole program? This idea of rebalancing and trimming, looking for the next opportunity because this is a really smart way to manage your your portfolio rather than just what sitting around watching it bloom and just watching the flower die and fall to the ground, watching the eggplant get rotted. Don't you want to pick that fruit? Don't you want to get the the benefits of your garden? That doesn't mean you need to take those and necessarily turn it into income, but you can take it and maybe utilize it for something else. Turn it into cash and then redeploy. Find another place where may have the next opportunity. be proactive watching some of your grape vines, your grape vines get to that point where that is just perfection is saying we are going to pick those right now and we're going to turn into something else which is a great wine. So take the fruits of your labor so to speak. Let's get those off of the vine and let's put those into another opportunity. A good farmer is not going to let the the the the wine the grapes rot and not have wine. They're not going to let the wheat just die off and not get bread. So, you are the farmer of your portfolio. You're the farmer of your portfolio. You are responsible for what you do. Whether you're looking at your own portfolio, maybe you're a trustee on somebody else's portfolio, you have the requirement to do more than just sit around. Something to think about and I want you to think about it. I want you to stew on it because it is good time towards the end of the year, towards the end of 2025. Here we are in the end of October, last show of October to start really thinking about this, more than think about this. So, you got to do something. All right, let's talk about Interactive Brokers. We're going to get to our guest as well today. I'm pretty excited about who we have on today. Here's a question I want to ask to you and I want you to think about. Will the Fed leave the rate unchanged at the October 29th, 2025 meeting? The yes forecast currently traded right at about 12% and the no was at 86%. With Interactive Brokers forecast contracts, you could trade on future events like climate, the economy, or politics. Pick yes or no. And if you're right, you earn a dollar. Forecast contracts are not suitable for all investors. Make your prediction. Go to ibkr.com/for and start predicting today. The last day for trading of this contract is October 29th. Let's talk about our guest today, Danielle D. Martino Booth. She's the founder and CEO of Quill Intelligence where she uh brought together a core team of investing veterans. She's the author of Fed Up, an insiders take on why the Federal Reserve is bad for America. She has a column on Bloom Bloomberg View. She's a business speaker. She's a commentator frequently featured on CNBC, Bloomberg, Fox News, Fox Business, a good friend of the show. Prior to that, she was um nine years at the Federal Reserve Bank of Dallas where she served as advisor to then President Richard Fiser throughout his the the financial crisis. So, she knows a bit about what goes on on the inside. We're going to get to that plus really focus in today on US economics and global economics to see where we are and her comments on that. I have a lot of really great questions. Let's get right to it. Danielle D. Martino Booth. Hi. How are you? >> I'm great. How are you doing? >> I'm doing great, thanks. I have a lot of things that I want to talk to you about. Um, I hope you enjoyed your summer. We're heading into the next phase, the darker daylight savings time, uh, phase of the year where gets a little crispier, colder. >> I look, I welcome that. I I I am here in in Texas where it takes a little bit longer for summer to end. So, bring it on. >> Yeah, I hear you. So, I want to talk to you. I want to start with uh a pretty big picture discussion about a couple of different items and and then I want to get your opinion on those. Then I want to kind of really segue into the area of US economics and then move right into what's going on around the globe and then tie it all together. Okay, >> let's do it. And I apologize in advance. There's there there there are tree trimmers and people working inside my house. So, um I I'll speak as loudly as I can. You have trees in your house. [laughter] >> That's a good one. I I do feel like I have trees in my house these days. No, I have workers outside and inside today. Wee. >> Got to be clear. All right, let's talk about quantitative tightening. Let's talk about quantitative easing. Uh one of the things that was recently happened in a conversation by um Fed Chair Powell was that they're talking about ending their tightening the quantitative tightening process which was in effect to reduce down their debt right this massive amount of debt that we have outstanding there. So what does that mean and and why now? Well, so we have kind of run through the excess liquidity in the system kind of like where we were in 2018 2019. Um, and so the Fed feels that it it's time to not repeat the errors of the past and try and ensure that there is ample liquidity going forward. And that's why it's talking about stopping its balance sheet shrinking. But I thought that we could try to over time get great tax receipts and have all sorts of opportunities to reduce down this debt. Is it is this basically confirming that we are never going to get rid of the debt unless we do something dramatic because we're not willing to accept the pain that's uh accompanied uh the process. >> You know, that is certainly one way to look at it. And um and I I fear that you were absolutely correct. Every time we get to a point where we're starting to make some real progress in shrinking the Fed's balance sheet, in imposing fiscal discipline, we seem to take two steps backwards. And um and that is a very poor reflection, if you will, on the stability uh as a standalone of the US economy. I think I think the Fed has adopted the everyday citizens uh how they deal with credit cards, which is basically they swear they're not going to use them. They run them up, they pay them off once, then they say, "Well, that was easy enough. Let's run them up again if we need to when we when we have that opportunity." And then somehow it gets to a point that they just have to live with this minimum payment for the rest of their life. I feel like the United States is on a minimum payment on a credit card deal and it's going to go on forever. >> Well, it certainly feels that way. Yeah. >> And and again, you know, this is not something that we've had with us for all of time. This is a fairly new tool in the Fed's toolbox that didn't start in um until 2008 when the Fed first took the overnight borrowing rate to the to the zero bound and started to blow up its balance sheet. So, it's um it's disheartening that we can't seem to pull back from this because it hasn't even really been around for 20 years. My gosh, I can't believe it's almost been around for 20 years now that I say that. >> Yeah. I mean it it's again I I just don't see any way out of this because nobody wants to do the hard work inclusive of me by the way. I'm not saying I want to you know suffer. I don't want you to suffer. I don't want anybody to have a problem. I don't want to pay more taxes. I don't want to have less social benefits for those that need it. I mean there's really a very difficult way up. Let's kind of go through though a couple other things that I have on my list very quickly. Um this whole mortgage fraud thing that came up, right? this thing of get this person out of their seat and that is it seemed to backfire and you don't hear about it anymore, right? I don't even know what happened right now now that think about it. What even happened to that lawsuit that was pending? >> Well, you know, um it's it's interesting because we've certainly seen um PY scale back to a great extent all of these allegations of mortgage fraud. Some of that might have to have done with the fact that his own father uh was implicated in a similar situation. Um and but um you're right >> which by the way is hysterical. It really is kind of I mean can you imagine that slapping and then him getting a call. Hey sunny boy. What'd you do here dude? You got me in trouble and you put me right in front of the news. And I think it was the state of Michigan if I'm not mistaken cut me off. >> Correct. >> Yep. The state of Michigan said you do not get to claim you don't get to double dip. You don't get to claim tax exemptions in two states. Um, no. There was there was definitely an irony there and it goes to show you that if you have access to big data, other people have access to that same big data and they can play the same game. >> Yeah. And um so here we are and yet the Supreme Court is still going to be deliberating on a very important precedent case when it comes to um Fed Governor um Lisa Cook. That really will happen. So despite the fact that the administration appears to have backed off, the Supreme Court is still faced with having to decide whether or not a president can dismiss the head of an agency or a Federal Reserve governor uh while while the Supreme Court is in session. >> Right. Amazing. Amazing. Let's talk about stable co coins. I don't know if we can go through this, but um the idea of stable coins, I think it's really kind of fascinating that that I think that some of the major players out there that were possibly against all of this have realized that wait a second. What backs stable coins is traditionally US treasuries and as such we have an instant buyer there. So, we can back off and keep rates, you know, keep a little bit of a ceiling on rates here because if we approve and allow these stable coin things to happen, well, it's an it's a it's a uh automatic buyer. Any thoughts on that? Well, I mean, when you tie in the idea of the US dollar and treasuries, all of a sudden you're having a much different discussion than you were having about something that did not have this backing. And if you think about it being a digitized dollar to make things overly simple, uh then of course major banks would have a huge would have a huge role to play in this. So, stable coins here to stay for some reason until they blow themselves up somehow. >> Well, yes, and that is and and that's the real question going forward. But I mean, you could you could potentially ask the same question about the US dollar as it stands today as well. Um, since we were just talking about national debt and how long we can continue to carry these egregiously high levels of national debt and and keep the sanctity of of the dollar intact >> and and and what's your response to that? >> Oh, I think there will be a limit. I I think um in fact, it might not even be as far over the horizon as we anticipate that it it might be. There's talk of a a tariff check going out to Americans. The last time we sent uh checks that were directly depositable and became cash for Americans, we ended up with double digit inflation. And um you know that inflation of that magnitude certainly chips away uh at the ability of of the government to begin to tame its debt. In fact, it ends up causing it debt to grow as we've learned because interest payments become untenable as as inflation rises. >> Yeah, I've been hearing something lately about people, this is something that's not new, per se, but it's been going on tremendously. New home buyers are buying houses with like 1 5% down, maybe maybe 2% down, getting like a 3 and a half, 3.75% 7-year ARM and trying to flip them again. >> And the paper and the paper is being if it doesn't flip, if you're just a buyer, the paper's given to you by initially by the the um home builder and then the home builder will then sell it off on the back end. But you could basically be into a house for 2% down, let's say. >> Uh, that scares the tar out of me. >> Yeah, it's all and with a seven-year arm, which, by the way, which makes it kind of appealing. You're like, wait, let me get this straight. You can't you can't do it on a on a uh existing home, but on a new home. Think about that, right? You know, you got a a million-doll house, you put down 20 grand, and you pay 375 on a seven-year ARM. Now, you got to pay the PMI and a few other things, obviously, house taxes, etc. But still, that's a pretty good deal compared to a 30-year mortgage is 6 and a half% and putting down 10%, which is 100 grand or or or 20% if you want to avoid the PMI, which is 200,000. You're putting down nothing. Do this a couple of times. >> Yeah. This is this is not a this is not a good development for the housing market as we know it because so many Americans are sitting on the sidelines and not able to get into um into the housing market as things stand. You certainly don't need a new instrument of speculation to drive home prices back up when when when it's time to drive them down. >> But this this particular uh well in some countries we call it a scheme. When we say scheme, it sounds bad, right? But this scheme, this this this plan, this this way of doing things, it's been going on recently in a in a big way in the in the technology, and I don't want to get into a whole rabbit hole and chase ourselves down on this whole thing because I've been talking about this on the show for a while now. The whole vendor financing and circular financing where the vendors are giving money to the parties that are buying their product and basically giving it back to them at the end. And that's what's happening here. It's essentially the the the the developers, the new home uh companies, the new the construction companies, um the big ones in particular, doing vendor financing, but for the ultimate buyer. They're saying, "You know what? Hey, buy the house. I'll give you all the money to buy it. Take money off of the books from creditors, maybe private credit, by the way, which is insatiable these days. You know, private credit through private equity. Uh packaging this stuff up through all sorts of loans that look like they're good. And then, um doing the same thing. The same thing is happening with vendor financing. We're seeing a dramatic level of I will call it uh uh what would I call it? It's it's magic. [laughter] It's magic on on the finance, but it's also um a little bit of uh creative financial financing going on. And >> yeah, I always get worried when we're talking about the latest innovation in financing. Yep. Um, those are the things that that should make the hair in the back of your neck stand up. >> Yep. Financial engineering and creative stuff. Let's talk about what's going on in the US, the economy. And talking about the uh Philly Fed, one of the I don't know about you, but of all the Feds, I was always taught to look at in terms of their manufacturing numbers, the the actual uh monthly report. I was always told, hey, you know, Empire, not so much. This one, Philly is the one we want to focus in on. that is that has traditionally been the case. It has the longest history going back to 1968. It is the the epicenter of the chemicals industry in the United States which is uh a barometer for the wider industrial um economy. So we we definitely have always looked to the Philly first. >> So tell me what's going on there. We saw that um the current prices paid dropped a bit which means on the surface of that exact point that inflation's coming down but um tell me about kind of your thoughts about some of the components of the Philly Fed index recent report. >> Well the so the Philly Fed's most recent report was definitely um stronger than I think a lot of people had anticipated that it it would be. Um, that being said, we were all paying very close attention therefore to the the Philly Fed services sector survey that came out subsequent to that to see if there would be this kind of validation and there was not. >> So, >> what it so so for us >> I'm sorry. I'm sorry. I'm sorry. I I'm speaking about Empire. I have my I have my surveys messed up. I was wonder I was wondering what was going on there. I was a little confused. >> My my apologies. I'm sorry. >> Let's wind that back and start all over again. It's okay. We don't we don't do edits. So, what tell me about I'll give you some some high high level things and you can discuss it. Right. Philly Fed current prices dipped three points to 35.8 in October. They're only three months between 2011 2019 that came in that high though. So, pricing pressures, what does that mean for labor? What does that mean for um employment etc? What that means for labor first and foremost is that there's going to be less of it and in the sense that um O'Reilly Auto Parts for example today came out and said we're not able to get people to pay higher prices and therefore we're seeing a decrease in our sales. >> Um the biggest problem with higher prices is that companies cannot control for them. they must pay them and if they cannot pass them along to the end users then they end up having to control the only cost that they can control and that is labor and and that's why we're seeing continued layoffs and and and and increasing numbers of of cutbacks that we're seeing and and and re you know what it really has picked up here just in the last two weeks or so I would say >> what's interesting is that even though and some some economic numbers we can't get right now because of a the shutdown. But aside from that, I mean, who knows? We may have an 8% unemployment rate right now. We don't know. We don't know. Um, obviously they're kidding around. That's not going to be there. But when it comes to the orders, clearly the new orders and inventory spread in the Philly's non-manufacturing survey fell dramatically. >> Dramatically. I mean, like historically. And and that is a real cause for concern. It tells you that that demand has crumbled in a very short period of time. And then you joke a little bit less about um about whether or not the unemployment rate may unemployment rate could be appreciably higher than what we think that it is right now. >> So with that and the fact that the controlling cost can be things like employment uh or or margin compression, I don't care how you want to look at. They could do it a few different ways. they can not hire, [clears throat] not give raises, increase prices, but if increasing prices doesn't work, then they could take it on the chin if they don't want to fire people. You know, we don't know where they think the the how long this is going to be, if it's temporary, if it's a long period of time. But the bottom line is when we're seeing that these new orders for inventory and inventory spread, is that possibly also because there's a lot of pull forward and this is the impact on the back end because some of the things that everybody knew were that with all these tariffs going in, they'd have to, you know, frontr run this whole thing and that somewhere in about April or May supposedly, maybe even June was supposed to be that cut off time when okay, everything that was shipped was shipped. Everything that's coming in, no tariffs on these, then the tariffs start. to get this going. Is that possible or are we way past that? >> No, I don't think we're past it at all. In fact, if you look at other countries like Germany um who have seen their order books get just annihilated, that is indeed the it's it's the hangover effect, if you will, from all of the uh from all of the stock building that was done in anticipation of the tariffs and now the demand's not coming through on the back end. So you're seeing order books just decline incredibly whether whether or not you're talking about the the Philadelphia region and the services sector or the country of of Germany that is the world's third third largest exporting nation >> behind Nvidia [laughter] right um >> that was good that [laughter] was actually that very clever >> uh so when it so let's just kind of go through this one more time just to be clear about this so there is a hangover effect, which turns into, let's call it a collapse. But that doesn't necessarily mean, let's think of the bright side for a second, that the collapse will continue because they could pick it up on the other side unless demand just totally is gone, right? Because if we have the same demand that was continuing, they may not need to have the orders. Sales to inventory, sales to um um spreads would be what it is. But uh the question is going to be like two months down the road, right? Do all of a sudden things normalize. So >> I think that I think that that is certainly the hope right now and that's why there is so much uncertainty out there and and people are paying as close of attention as they are to things like declining credit card usage. um you know the the the the weekly data that comes out from Bank of America on their customers use of debit and credit cards that is weakening as well. So we're all kind of holding our breath right now saying are we going to be able to hit the refresh button once this stock building is burned through and are we going to have a normalization on the other side of that or is the US recession going to continue? So, US recession continue. Wait, wait, wait. Let's back it up for a second. Reel that back. That was quick. What were US recession that we were not made aware of by email or by true social post? >> Uh, well, that would be the one where uh after a very short period of time, we learned that we had a net job destruction, net job losses according to the Bureau of Labor Statistics, which usually takes years to provide us with these revisions. And yet we found out in two short months that we lost jobs in the month of June. And there's no reason given that what we've heard from individual states and adding them up subsequently from their departments of labor which are not shut down right now by the way that that June actually looks to have been even deeper in the red. A loss most likely of around 65,000 jobs if we were already losing jobs uh before the shutdown. and revisions to prior years tell us that net job destruction was also in place in the second quarter of 2024. The question we must ask right now is what's going to get us out of recession? Well, it's it's not going to be the relationship we have with other countries. You know, these great relationships supposedly that we have, you know, in Canada, talk about a an absolute uh collapse. the numbers that came out last week on the alcohol orders from various, you know, like our bourbons, our beers, our whatever we have here, right? They are not stocking those on their shelves. Not only that, if you look, I mean, it's like an 80% decline in in alcohol sales to to Canada from the US. >> That's that's nothing at the fact that they're not coming here anymore to the United States, right, >> to visit, right? And that is its own real nasty set of circumstance because we have relied so heavily because Canada is a huge ally on Canadian tourism. >> Yeah. And I live in Florida so Hollywood has been you know we used to make fun of all the Canadian drivers by the way. Um but what's interesting is this is something that from for many would be like well who needs them you know well we don't want the Asians. You know Asians aren't coming here. They're not they're not you know here and there but first of all um you know even though the dollar has come down in value it's still high comparatively for where it's been. That's where all the travel I mean everybody that I've seen the big travels like going to Asia it's going to Europe. Um they're not coming here as much and a lot of people have said you know who who needs them we need them. I mean there's some weird thing that's going on that there's this belief that somehow we are not we could stand alone. The reason we are so strong is because of the relationships that we've had over the years and the globalization trend that we've had that we have if all other countries considered every country in the world we have made out like bandits from offshoring. Now we've built up other countries like Vietnam and Indonesia and um you know that could even to a degree initially Singapore but they have their own thing going on there um and Korea >> India's India has been a huge uh beneficiary >> huge beneficiary but also every bit of the beneficiary that we give them there's a lot we get back >> of course that's called goodwill and that's why and that has benefited our our hotels our airlines um our tourism centric states and cities And yet we hear one month after another that we are not seeing um traffic pickup at all in the most tourism ccentric city in in the country which is Las Vegas. >> Right. I heard Las Vegas is awful is in bad shape. >> I was I was just there. It is like a ghost town. >> Wow. Wow. Well, the prices haven't helped either. Everything is so I' I've getting reports from a few of my friends that go to they go to the mandatory two conferences they go to each and every year in Las Vegas, for example. He says the prices are absurd in Vegas. And the old Vegas >> $3569 for two beers at the pool a few weeks ago. >> $35.69 because they charge you all kind. It's it's like buying a car between tax, title, license, and gratuitities and everything included. I mean, I was like, did I break a window? It was just a beer. >> Yeah, it it's it's a problem. And it it is getting to the point as you discussed and you first start out with the O'Reilly discussion where people are saying, you know, I can't spend anymore. I just can't do it. As a matter of fact, um so I went to the store the other day and uh the local grocery store and I usually get the I stock up on some waters and some things that you know for for the office. And uh this day I don't know why I was in there. I'm like, you know, hey, let me call the office, see what they need. So I call bring some Diet Coke in. I'm like, okay. So, I go over down to the Diet Coke aisle, which I get the cans. It was like $10.79 for a What is that? 12-pack. >> 12 pack. >> And I'm like, what? I thought there used to be a 25 cents each. So, that's a that's a what is that? A 250% 300% increase in price. And um usually I would buy a bunch of these things, right? If I was asked to buy these, I'd buy three or four of them. I'm like, you know what? I'm buying one pack. We'll go through them slowly until we can find one of those BOGO deals or whatever it is. This is not happening. So, not that everybody I'm the one that likes to diet cokes in the office, by the way. Um, so it's not like I'm saying to my staff or anybody, hey, you can't Yeah, forget it. You're not having forget coffee, forget diet, you know, bring your own. That's not what's happening. Point is, though, that I drew the line. I drew the line recently. I was having a party and I called up someone. I said, "Listen, can you get me Alaskan?" This is a little bit higher end issue. Uh, can you get me Alaskan king crab legs? cuz I got some like 6 months ago and 6 months ago they were expensive at $40 a pound for the big big ones. The really really big ones. Um yeah, let me check. Come back. $75 a pound. I'm like wait wait wait just a few months ago they were $40 a pound. I'm not paying $75 a pound. Not happening again drawing the line. And I think people are finally even for things that may be semi-necessities, whatever we call them, staples I guess we can call them, right? They're they're backing off. Yep. >> And that's where things start to be problematic. >> Oh, yeah. I mean, listen, I I have always been even before they were they were electronic, I've always been a coupon cutter since I was a child. Um, and and at this point, I wait until it is buy two, get three free on those 12 packs of Diet Coke and Coke, and I stock up when they're on sale. And otherwise, I do not buy them. I will not cross that line. >> This is an interesting situation. And you know, one of the things we note also is that we've seen a lot less um consumption by America and other countries because we've we've had a just like we did in the last term, we got to find a bad guy. We got to point a finger. We got to say China's the bad one. You know, we don't like them for all these different things they do. I found it fascinating the other day that there was a discussion from I believe the Secretary of Agriculture, I believe that's who it was. Um, whoever it was, it was a government official, I believe, was talking about how, oh my god, China is targeting our farmers. They're trying to do damage to our farmers. They're not buying the soybeans. They're not doing this. They're not doing that. This whole discussion about how China is targeting I'm thinking to myself, wait, wait, wait, wait, wait. Aren't we targeting them? Aren't we trying to cause economic harm to them in response to something? You know, that's not brought up in the discussion. Nobody wants to hear about that. That's the fact. These tariffs are causing economic harm to big companies and small companies in China, in Thailand, in wherever it else it is. Forget the stock markets. I'm just talking about the actual businesses. We saw that China's Facebook sales revenue reached a new cycle high in quarter 3, but it was this whole this inventory s surge, right? Um but yet we saw that things on the other side like borrowing fell. How does that how do you how [clears throat] do you square that? Yeah, look, um, if the demand is not there, then you're not going to see any kind of an echo in credit and the demand for credit. And that's that's a very real thing. Um, and you know, I do find it to be somewhat ironic going back to your comment about farmers who are up in arms. Don't get me wrong, I my children go to school in Indiana. I absolutely love farms and farmers, but the first time that we had a trade deal with China, they did not live up to their end of the the the commitments that they made to buy soybeans, to buy corn in the first place. Mhm. >> So this should not be coming as some gigantic shock to the system um that that China has taken the next step and bought from countries it feels are its economic allies like Brazil, like Argentina where they're buying up all of their soybeans. >> Wouldn't you do that in business? If there was somebody that was bad mouthing you on Twitter, would you send them a free subscription? >> Of course not. >> Would you? You know, isn't this a way of just And by the way, we all knew that the framework deal to buy soybeans and sorum gum or whatever that stuff is and whatever all this stuff, right, was never first had any teeth in it. Number one. Number two, it didn't have any kind of mechanism to track properly. And it third thing, just to go back to the first one, if it wasn't lived up to, there was no harm, no foul. This is all about and this all is about making a deal. That's all this is. And I wish people could see through this for once. It's all about just the fact that we got a deal. I made a deal. The the fact that we got a deal is more important than the deal. The guts of the deal. That's why nobody knows about any of the deals. We have no idea what the most of this stuff is. >> No, because to your point, there's no accountability. There's no followthrough, >> right? It's all about what happens right now, making us look good and all that. So, what is going to happen with China? Now listen, I have you been to China, by the way? >> I have. I have never been to China. Um, it's been suggested that I not go. >> Oh, why not? Well, when we had the last trade deal signed, um it was in the heat of when the global pandemic was breaking out and China insisted on having a force majour clause in the trade agreement with the United States that said that in the event of um in in the event of a global pandemic, for example, >> uh something that could not be predicted, then they would not have to live up to their end of the bargain. And lo and behold, very soon after the trade agreement was signed, then we found out that we were in the middle of a global pandemic after all. And I might or might not have said in a public venue on an interview that went viral. Uh >> oh. >> That that uh putting an act of God clause in a trade agreement with full knowledge that there actually was a pandemic was tantamount to an act of war. So, no, I I am not welcome in China, nor have I ever. >> I'd stay away from Chinese restaurants if I were you, too. By the way, with that, you know, but nonetheless, uh the the the thing in China, what I was going to mention, uh I I have driven and I've been through many many cities in China and the whole idea of ghost cities are real. I can tell you that. I can tell you that. Uh as opposed to just thinking that they were made up. Uh there was miles probably 50 miles of a run that I took. Not a run, a car drive uh that I took uh along this one particular highway and uh rows and and and rose deep of housing uh apartment complexes uh little mini cities built but nobody lives in for miles. It's you can see it. you knew what exactly was going on because there's no parking lots, no nothing. It was like half built but yet but built and that is something that has gone on. The question is um is that what's been going on with this inventory buildup? They just trying to economically keep things running when in fact they're just going to end up putting it into the dumpster on the back end. Well, and that's, you know, you've actually also seen films of of these ghost structures being bulldozed and blown up. And, you know, the latest data that we have out of China shows that that home prices are still falling uh throughout the country and that residential real estate remains extremely problematic. >> Yeah, it's and the banking system is collapsing on that as well. It's kind of interesting. Uh what do you make of the um of the recent once again instantaneous in instantaneous out banking crisis that we have with regard to auto parts distributors and auto related companies with the fraud with the inventory um accounts receivable financing that they pledged to way too many um lenders. as in a recreation of the uh Broadway play and the movie The Producers. Well, um, it is interesting that it is specifically the bankers who continue to insist that this is a one-off event and that this is not this this in no way reflects widespread um, you know, problems that you can get into when you start to finance your suppliers, which we were just talking about that with housing, weren't we? >> Yeah, we were. So, wait a minute. Let me just get something straight. Are you saying that if there was a situation that was much more uh problematic and it was much more uh what's the word I'm looking for? Uh >> widespread >> widespread that the banks >> there's too many >> that the banks would come out and they would say >> that yeah look we have a big problem. >> Well no I'm not that naive. I was I was wondering I was wondering what you were saying there. >> So you're saying >> so far so far for those of us keeping count there are 10 banks 10 count them on two hands 10 banks that have been that have been brought into this first brands orolor mess where they've had um major levels of charge offs. So if nothing else we can't and we just had another subprime lender go belly up by the way called Primal Lend. We can certainly say that at least the practice among lenders was more widespread and more problematic than what we had thought it was. And you know, look, this this is part of life. If if you want to find out where there is is smoke, there's fire, so to speak, you you you find out where things have begun and the epicenter of them, and then you just fan it on out. And that's exactly what happened with Offbalance Sheet Financing and and Enron and World Comp. We've seen these movies before and we know how they end. That was those were concerted efforts by the company of an internal management situation that they wouldn't release. What's fascinating about this is the poor and sloppy lending standards that went on for some of these banks, especially when you have multiple lenders. Uh, it's funny because they came back, a few of them said, "You know what? By the way, just to be clear, I think this was um what was the big one? What was the big one?" Uh, who who's the bank that got hit? Was it Jeffre got hit? And then >> Jeff got hit very hard. >> Who was the other bank? What was the other >> Fifth Third? >> Yeah, there's another one that was the second time. >> JP Morgan JP Morgan Chase got hit. >> There's another regional. Anyway, that regional goes and they said we did a check of our books and we re we confirmed only one, you know, we confirmed and we went out and we did the research and we see that yes, we're good now because only one account receivable pledge per account receivable. I'm thinking to myself, wait, wait, wait, wait, wait, wait, hold on a second here. That that comes back within a week. You go and do all the research within a week. Does that mean that you did not do any of this on the front end of of loaning this money out? Well, the answer clearly is they didn't, right? Or they're lying now. I don't know. Maybe both. >> That that gets you back to the whole idea of sloppy underwriting and and not the left hand not knowing what the right hand is doing. And by the way, it extends all the way to the Federal Reserve because the Federal Reserve itself had to reclassify commercial and industrial and consumer loans into this other bucket, non-depository financial institutions, which is basically lending into the shadows. The the to the tune of 300 billion dollars that they didn't know was were loans that were mclassified on bank balance sheets. So, we're we're in trouble if the regulators also don't know what's going on. >> No, I I I that's part for the course. That's part for the course. The regulators never know what's going on in my opinion. I mean, seriously, well, if it's if it's meant to be hidden or footnoted, you know, they they're they're just not they're just there's too much. And the fact is there's too much money floating around. By the way, most of it created by government and then created, you know, this is I I talked I started the show off talking about how where are or the discussion of where are we? Where are we right now? the idea that where we are right now is not much different than we were post 2009, post 2020 where somewhere along the line there was a drop in interest rates, there was more stimulus given that we had some big bill that was dropping money even though you know the the um inflation reduction act by Biden and the big beautiful bill by Trump. Both of those were stimulative in a big way. That creates a massive amount of money into the system which then therefore uh is is throwaway money where people just speculate like all hell on either meme stocks or leverage. There's more margin in the system right now. We got the reports from various players. They are the um the most margin they've ever had uh from some of the major players out there in terms of the brokerage margin. >> Oh gosh. margin debt even as a percentage of GDP has never been higher than what it is right now. And that does not include, by the way, the three times levered ETFs that you can that you can buy just to bet on one stock, but but but with triple the exposure, >> right? >> All of that leverage is not included in what we're seeing with margin um being at record highs. >> And when margin is at record highs like this and confidence is up like this, it it's always a shaky situation because the cascading effect of the downstroke is a problem. If in fact there is something that is real, not a one day wonder like we've seen, not one day that Trump is not having a meeting and now he is having a meeting and not one day that the Fed is going to, you know, keep it solid. Now he's going to decrease or whatever party is pulling the plugs here. But a lot of this also is based on government um government uh being involved. Now the you know we we've talked about and and discussed especially with the Treasury Secretary he's been talking about doing a sovereign wealth fund. Well instead of doing a sovereign wealth fund I have a better idea. Let's just give money to Intel. We'll get the price of you know the deal at a discount. We'll own a piece of it. Let's give money to MP materials. You know what? How about we give money to now quantum comput quantum computing companies and you know for in return for a grant. I mean it's almost in a weird way better. We got a big piece of the company. we get it at a huge discount. Forget the sovereign wealth fund route. Who needs that? We'll just dangle some grants out there with with taxpayer money, which by the way, I don't even know where they got the authority to do so. You know, one day we weren't involved in the capital markets. Now we are wholeheartedly. >> Yes. And that does not sound like capitalism to me at all. >> No, we were arguing for years that there was an unfair advantage by all these other countries because they have what what's called stateowned enterprises, S OE. And I'm like, that's a terrible thing. Oh my god. Could you imagine? We can't >> we need to put a sock in it, boys. >> Never in the United States. And then here they're going to buy a chunk of Intel, >> right? It's absurd. It's just totally absurd. And and everybody makes it think like there's nothing wrong with this. >> Oh, we did. Well, you know what? They're doing it. We're going to do it, too. Wait a second. It wasn't good to begin with. That doesn't give us the green light to do this. It's I Danielle. It's so frustrating. you know that >> I mean our parents always said that's not an excuse but but but such and such's parents are allowing them to and you're like okay you're still going to fall off the roof and break break major limbs that doesn't make it okay. >> Yeah. Crazy what's going on. Tell me a little bit about what the things you've been doing over at uh at your company and tell people where they can get over and find Quill Intelligence. We'll have this over on the show notes for episode number 944. But tell me >> I you know should I I I'm I'm hereby placing my request to be episode number 1000 first of all. >> Oh >> um >> we could do that. >> Well yeah we can do that. >> Look at you almost a thousand. >> Um >> in any event uh yes please come to dartinob.substack.com. We have a very loyal following with our daily feather readers. We publish every single trading day of the of the year whether the government is shut down or not. we we were always looking at alternative data sets and thank heavens for that because we didn't have to play as much catchup as some other research houses have. Um but anyways, yes, dartinobooth.substack.com. If you run institutional money, come to qi research. I would love to personally talk to you about that. Um and if you don't already follow me on what used to be known as Twitter, please do so at D Martino Booth, >> formerly known as Twitter. Well, thank you so much as always. a very insightful and a very uh I I you know what I don't know what it is, but I always I always uh my my it's you bring uh good stuff out and uh I find it to be a a real little bit of rebel rousing that we do here, but also some some real truth and some facts. So, I appreciate that. >> Anytime. >> All right, we'll talk to you soon. Thanks. >> Take care. Bye. And that's going to wrap it up for this episode of the Disciplined Investor podcast. Next week coming up uh right before Thanks, not Thanksgiving, right before Halloween. Vitali Katen Nelson and then we have Manuel Bla, Ross Gerber is coming back, Tim Knight uh in mid November, and then a whole bunch of guests as a matter of fact uh trying to uh button up a couple of people, but we have some wonderful guests coming on and a bonus episode in the next couple of weeks as well. uh talking about some ESG and a few things that we're going to tack on to the back of one of our other shows coming up. Uh listen to DH Unplugged, go over to the discipline investor and uh let's just get it going. Thanks for uh being there. Thanks for your support and uh hope to see you uh next week. We're going to have a good time with it. See you soon. This podcast is intended forformational purposes [music] only and does not constitute personalized investment advice. 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TDI Podcast: DiMartino Booth Says What?(#944)
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This episode is sponsored by Interactive Brokers. And are you ready to take control of your financial future? Meet Portfolio Analyst from Interactive Brokers. The free all-in-one dashboard that lets you consolidate, track, and analyze all your financial accounts in one place. You don't need an IBKR account to use it either. Just connect your accounts and see your complete financial picture, investments, performance, and allocation all in a single screen. Plus, you can plan smarter with IBKR's new tax and retirement planners built around your goals and market assumptions. Get deep portfolio insights and detailed risk assessments and compare performance against more than 300 benchmarks. Plus, manage with confidence thanks to GIP's verified returns. Well, you ready to get started? Sign up for portfolio analyst free for everyone at ibkr.comfrepa. Interactive brokers, the best informed investors. Choose ibkr member sipc. The disciplined [music] investor is all about you, your money, and the markets. Sit back and get ready for this [music] edition of the disciplined investor podcast. This episode [music] of The Disciplined Investor is sponsored by Horowits & Company. If you're looking [music] for a portfolio manager, look no further. Horowits & Company. From seed through harvest, [music] cultivating financial success. >> It's time to tend to that garden. A little maintenance on the portfolio. October does what it usually does. Targets raised. Analysts are trying to keep up even if earnings miss. Our guest today, the Fed Watcher, Danielle D. Martino Booth. All this and much more on episode number 944 of the Disciplined Investor podcast. [music] [music] Well, you can tell it's October, can't you? I mean, the days are shorter. It's dark. It's dark when I wake up. How about you? It's very unsettling. It's nice because you could sleep longer. You don't have to worry about putting down the shades as tightly as you do or maybe even those uh curtains or the the blackout shades that some people have. I have some. They don't do all the job that it's necessary in the bright days of the Florida sun. But bottom line is we know a few things. We know that markets have tended to be a bit more volatile during October and that's what we've seen so far this October as well. Much of the added volatility, I got to tell you, has been, I would say, let me think, mostly, I'll give it 90% self-inflicted, self-imposed volatility due to the fact that we have this ramp up in tariff chaos from the White House. We have a government that is still shut down. We have speculative speculative frenzy that's gone off the rails and it's gently starting to see some calming as earning season rolls through. We saw the banks come out a couple couple three weeks ago and those were pretty good numbers. We saw the deal making uh investment banking really on a tear and the banks did really well. Very impressive overall. Then we started to see a few other things and the cracks started to form. We saw the Netflix, we saw the Microsoft, not Microsoft um well in the in the category of problems, we saw the stocks falter for Netflix and for example Tesla initially. We saw that IBM concerns about their Red Hat division and all of a sudden some of the chip companies are coming up and saying, you know, well, you know, we thought things would be really good, but we're really not making the numbers that we expected yet. And this is what we see. This is when we see what happens when the excesses start to run out a bit because first we see that ramp, you know, the crazy moves that we can uh probably look no further than some of the things we saw with Beyond Meats last week or some of the other meme stocks. And by the way, these meme stocks are often associated with companies that really should be delisted. I'll say it nicely. or maybe even uh the realization that these companies are going to be bankrupt one day, but they do have something that is just so exciting to those that like to trade these things and that is high short interest. And I I I wonder oftentimes, and I talked about it on DH Plugged this week, why it is that people are still shorting these stocks down at 50 cents. Yes, it can go down to 25 cents and that's a 50% return. I get it. And even from 25 cents, you can go to 12 cents and that's even another 50% return. But with some of these names, the risk is so outsized to the upside if it catches fire. Like we saw the 500% return on Beyond Meat that happened just this week, right? But you know, we do know that of course that trees don't grow to the sky just like we saw with gold. I mean, did you see what happened there? The fact of the matter is gold, silver, platinum, palladium, they all came back down to earth pretty well. Still elevated dramatically, but that run that we saw and that exhaustion gasp upward, it had to be rectified. We knew that was going to happen. So, where are we in this? where the quantum names, the five or six different companies that got all the attention of maybe one day, someday something's going to be great with them and and drove these names up hundreds of percents had this huge fall recently only to be saved, by the way, by a possibility of the USA, this happened Thursday, the USA taking a position in some of these names. Once again, we're at this juncture of our existence for maybe a $10 million grant or a preferred payment of some sort. That was the weird news that we saw that the government was going to get involved in quantum names that may or may not be necessarily have the goods. We have quantum with major companies like an IBM. Why aren't we talking to them? Why are we talking to these smaller companies that may or may not have something that are, you know, on the verge of are we all of a sudden a speculative engine hedge fund? Yeah, we want to make sure that we get these advances. So, I understand the opportunity to fund these companies and even grant them money and take back a little position on the company as repayment for something for the future. But who who's the play who are the players that are giving out this kind of money and and and doing this? These are hedge fund guys. There's Bent and and and these guys. And you have to wonder if there's an ulterior motive to some of this. But this is what happens when governments are involved in capital markets like we are seeing and not just necessarily with the Intels or um the other names that they've taken a piece of like the quantum that talking about right now or the MP materials right for the security and safety of the United States were taking positions in these companies. No, I'm talking about aside from that the quantitative easing, the uh the the the various forms of money transfer. I'm talking about the stimulus. This is what happens when governments are involved with capital markets. You can think back to the 2008 2009 period of time where markets swoon then went crazy all over the place because we had the heavy hand leaving their greasy little fingerprints over everything. And after that, post the resumption of okay, it's okay to get back in the market, there's usually this speculation craze. Markets are up and then they eventually fail. Same thing time and time again. We saw that same pattern by the way in 2020 with COVID. Remember this, right? Everybody was freaked out. Oh my god, markets caved. Government came in. Oh, you know, everybody's going to get all sorts of money and, you know, we're going to prop up the markets. We're going to drop interest rates to zero by the Fed. We got um, you know, an amazing amount of money is going to be transferred through some kind of payment program to individuals, to companies, aka stimulus. And that created a speculation craze at that point. The meme stock craze was kind of you know created then you know the names. Time and time again we see this. We go through the standard scurve of peak to trroth but also of emotional movement of it's never going to get better. Oh my god, things are getting better. Let's really get in there. Oh, it's never going to get worse. It's always going to be wonderful. Uh-oh. What's happening? I'm worried about this. It's never going to get better. It's ne, you know, that whole It goes on and on. There's nothing different. It's just different peaks to tr different wideness of the period is usually the only thing different is the height, the depth, and the length. Very simple, but they all look the same. So, where are we now? I think it's an important question to be asked right now. because I think we're past the time that we saw the stimulus phase, right? We got the initial lowering of rates. We got the big beautiful bill that created more money flow into the system and we're I think starting to get past the specul speculation the speculative phase. Speculation, that's both words together. Speculative and speculation. Um we're past the speculation phase and now the question is where is the rubber meet in the road? Right? Because this is a time where economics could matter if in fact we can get a report if the government ever reopens, where earnings will definitely matter. You have to ask yourself, what do you do now? Well, for us, it's harvest season. Pruning the garden. That's what we need to be doing. And we're looking for those overgrown areas. Think about a garden, a forest. Think about uh think about a vegetable garden. I think that's the best way to look at this. Flower gardens are great for diversification. Vegetable gardens we'll think about for pruning and for overgrowth and for picking those really ripe fruits and vegetables. That's where we are because, you know, if you don't do it, if you're a farmer and you let those those fruits stay on the vine, they're going to be either uh overripened, they're going to spoil, or they're going to get eaten up by the uh various animals and insects. So, what we're doing is taking the time to see where we could take some really juicy profits. And I can tell you this is exactly what we did. Some of the names that kept running and running over the past few months, we were targeting them for a trim. And we did. We've been trimming a little bit, but we took some of them entirely off the table. Pick the fruit and said, "We are going to bank that right now." And some of these are the names that we really think still have an opportunity, but we also think they're overdone dramatically right now. they're going to be out of season. So, these are the ones that also added some unbelievable performance to our portfolios. But we need to think about it, right? Right? What do you think about this whole this whole program? This idea of rebalancing and trimming, looking for the next opportunity because this is a really smart way to manage your your portfolio rather than just what sitting around watching it bloom and just watching the flower die and fall to the ground, watching the eggplant get rotted. Don't you want to pick that fruit? Don't you want to get the the benefits of your garden? That doesn't mean you need to take those and necessarily turn it into income, but you can take it and maybe utilize it for something else. Turn it into cash and then redeploy. Find another place where may have the next opportunity. be proactive watching some of your grape vines, your grape vines get to that point where that is just perfection is saying we are going to pick those right now and we're going to turn into something else which is a great wine. So take the fruits of your labor so to speak. Let's get those off of the vine and let's put those into another opportunity. A good farmer is not going to let the the the the wine the grapes rot and not have wine. They're not going to let the wheat just die off and not get bread. So, you are the farmer of your portfolio. You're the farmer of your portfolio. You are responsible for what you do. Whether you're looking at your own portfolio, maybe you're a trustee on somebody else's portfolio, you have the requirement to do more than just sit around. Something to think about and I want you to think about it. I want you to stew on it because it is good time towards the end of the year, towards the end of 2025. Here we are in the end of October, last show of October to start really thinking about this, more than think about this. So, you got to do something. All right, let's talk about Interactive Brokers. We're going to get to our guest as well today. I'm pretty excited about who we have on today. Here's a question I want to ask to you and I want you to think about. Will the Fed leave the rate unchanged at the October 29th, 2025 meeting? The yes forecast currently traded right at about 12% and the no was at 86%. With Interactive Brokers forecast contracts, you could trade on future events like climate, the economy, or politics. Pick yes or no. And if you're right, you earn a dollar. Forecast contracts are not suitable for all investors. Make your prediction. Go to ibkr.com/for and start predicting today. The last day for trading of this contract is October 29th. Let's talk about our guest today, Danielle D. Martino Booth. She's the founder and CEO of Quill Intelligence where she uh brought together a core team of investing veterans. She's the author of Fed Up, an insiders take on why the Federal Reserve is bad for America. She has a column on Bloom Bloomberg View. She's a business speaker. She's a commentator frequently featured on CNBC, Bloomberg, Fox News, Fox Business, a good friend of the show. Prior to that, she was um nine years at the Federal Reserve Bank of Dallas where she served as advisor to then President Richard Fiser throughout his the the financial crisis. So, she knows a bit about what goes on on the inside. We're going to get to that plus really focus in today on US economics and global economics to see where we are and her comments on that. I have a lot of really great questions. Let's get right to it. Danielle D. Martino Booth. Hi. How are you? >> I'm great. How are you doing? >> I'm doing great, thanks. I have a lot of things that I want to talk to you about. Um, I hope you enjoyed your summer. We're heading into the next phase, the darker daylight savings time, uh, phase of the year where gets a little crispier, colder. >> I look, I welcome that. I I I am here in in Texas where it takes a little bit longer for summer to end. So, bring it on. >> Yeah, I hear you. So, I want to talk to you. I want to start with uh a pretty big picture discussion about a couple of different items and and then I want to get your opinion on those. Then I want to kind of really segue into the area of US economics and then move right into what's going on around the globe and then tie it all together. Okay, >> let's do it. And I apologize in advance. There's there there there are tree trimmers and people working inside my house. So, um I I'll speak as loudly as I can. You have trees in your house. [laughter] >> That's a good one. I I do feel like I have trees in my house these days. No, I have workers outside and inside today. Wee. >> Got to be clear. All right, let's talk about quantitative tightening. Let's talk about quantitative easing. Uh one of the things that was recently happened in a conversation by um Fed Chair Powell was that they're talking about ending their tightening the quantitative tightening process which was in effect to reduce down their debt right this massive amount of debt that we have outstanding there. So what does that mean and and why now? Well, so we have kind of run through the excess liquidity in the system kind of like where we were in 2018 2019. Um, and so the Fed feels that it it's time to not repeat the errors of the past and try and ensure that there is ample liquidity going forward. And that's why it's talking about stopping its balance sheet shrinking. But I thought that we could try to over time get great tax receipts and have all sorts of opportunities to reduce down this debt. Is it is this basically confirming that we are never going to get rid of the debt unless we do something dramatic because we're not willing to accept the pain that's uh accompanied uh the process. >> You know, that is certainly one way to look at it. And um and I I fear that you were absolutely correct. Every time we get to a point where we're starting to make some real progress in shrinking the Fed's balance sheet, in imposing fiscal discipline, we seem to take two steps backwards. And um and that is a very poor reflection, if you will, on the stability uh as a standalone of the US economy. I think I think the Fed has adopted the everyday citizens uh how they deal with credit cards, which is basically they swear they're not going to use them. They run them up, they pay them off once, then they say, "Well, that was easy enough. Let's run them up again if we need to when we when we have that opportunity." And then somehow it gets to a point that they just have to live with this minimum payment for the rest of their life. I feel like the United States is on a minimum payment on a credit card deal and it's going to go on forever. >> Well, it certainly feels that way. Yeah. >> And and again, you know, this is not something that we've had with us for all of time. This is a fairly new tool in the Fed's toolbox that didn't start in um until 2008 when the Fed first took the overnight borrowing rate to the to the zero bound and started to blow up its balance sheet. So, it's um it's disheartening that we can't seem to pull back from this because it hasn't even really been around for 20 years. My gosh, I can't believe it's almost been around for 20 years now that I say that. >> Yeah. I mean it it's again I I just don't see any way out of this because nobody wants to do the hard work inclusive of me by the way. I'm not saying I want to you know suffer. I don't want you to suffer. I don't want anybody to have a problem. I don't want to pay more taxes. I don't want to have less social benefits for those that need it. I mean there's really a very difficult way up. Let's kind of go through though a couple other things that I have on my list very quickly. Um this whole mortgage fraud thing that came up, right? this thing of get this person out of their seat and that is it seemed to backfire and you don't hear about it anymore, right? I don't even know what happened right now now that think about it. What even happened to that lawsuit that was pending? >> Well, you know, um it's it's interesting because we've certainly seen um PY scale back to a great extent all of these allegations of mortgage fraud. Some of that might have to have done with the fact that his own father uh was implicated in a similar situation. Um and but um you're right >> which by the way is hysterical. It really is kind of I mean can you imagine that slapping and then him getting a call. Hey sunny boy. What'd you do here dude? You got me in trouble and you put me right in front of the news. And I think it was the state of Michigan if I'm not mistaken cut me off. >> Correct. >> Yep. The state of Michigan said you do not get to claim you don't get to double dip. You don't get to claim tax exemptions in two states. Um, no. There was there was definitely an irony there and it goes to show you that if you have access to big data, other people have access to that same big data and they can play the same game. >> Yeah. And um so here we are and yet the Supreme Court is still going to be deliberating on a very important precedent case when it comes to um Fed Governor um Lisa Cook. That really will happen. So despite the fact that the administration appears to have backed off, the Supreme Court is still faced with having to decide whether or not a president can dismiss the head of an agency or a Federal Reserve governor uh while while the Supreme Court is in session. >> Right. Amazing. Amazing. Let's talk about stable co coins. I don't know if we can go through this, but um the idea of stable coins, I think it's really kind of fascinating that that I think that some of the major players out there that were possibly against all of this have realized that wait a second. What backs stable coins is traditionally US treasuries and as such we have an instant buyer there. So, we can back off and keep rates, you know, keep a little bit of a ceiling on rates here because if we approve and allow these stable coin things to happen, well, it's an it's a it's a uh automatic buyer. Any thoughts on that? Well, I mean, when you tie in the idea of the US dollar and treasuries, all of a sudden you're having a much different discussion than you were having about something that did not have this backing. And if you think about it being a digitized dollar to make things overly simple, uh then of course major banks would have a huge would have a huge role to play in this. So, stable coins here to stay for some reason until they blow themselves up somehow. >> Well, yes, and that is and and that's the real question going forward. But I mean, you could you could potentially ask the same question about the US dollar as it stands today as well. Um, since we were just talking about national debt and how long we can continue to carry these egregiously high levels of national debt and and keep the sanctity of of the dollar intact >> and and and what's your response to that? >> Oh, I think there will be a limit. I I think um in fact, it might not even be as far over the horizon as we anticipate that it it might be. There's talk of a a tariff check going out to Americans. The last time we sent uh checks that were directly depositable and became cash for Americans, we ended up with double digit inflation. And um you know that inflation of that magnitude certainly chips away uh at the ability of of the government to begin to tame its debt. In fact, it ends up causing it debt to grow as we've learned because interest payments become untenable as as inflation rises. >> Yeah, I've been hearing something lately about people, this is something that's not new, per se, but it's been going on tremendously. New home buyers are buying houses with like 1 5% down, maybe maybe 2% down, getting like a 3 and a half, 3.75% 7-year ARM and trying to flip them again. >> And the paper and the paper is being if it doesn't flip, if you're just a buyer, the paper's given to you by initially by the the um home builder and then the home builder will then sell it off on the back end. But you could basically be into a house for 2% down, let's say. >> Uh, that scares the tar out of me. >> Yeah, it's all and with a seven-year arm, which, by the way, which makes it kind of appealing. You're like, wait, let me get this straight. You can't you can't do it on a on a uh existing home, but on a new home. Think about that, right? You know, you got a a million-doll house, you put down 20 grand, and you pay 375 on a seven-year ARM. Now, you got to pay the PMI and a few other things, obviously, house taxes, etc. But still, that's a pretty good deal compared to a 30-year mortgage is 6 and a half% and putting down 10%, which is 100 grand or or or 20% if you want to avoid the PMI, which is 200,000. You're putting down nothing. Do this a couple of times. >> Yeah. This is this is not a this is not a good development for the housing market as we know it because so many Americans are sitting on the sidelines and not able to get into um into the housing market as things stand. You certainly don't need a new instrument of speculation to drive home prices back up when when when it's time to drive them down. >> But this this particular uh well in some countries we call it a scheme. When we say scheme, it sounds bad, right? But this scheme, this this this plan, this this way of doing things, it's been going on recently in a in a big way in the in the technology, and I don't want to get into a whole rabbit hole and chase ourselves down on this whole thing because I've been talking about this on the show for a while now. The whole vendor financing and circular financing where the vendors are giving money to the parties that are buying their product and basically giving it back to them at the end. And that's what's happening here. It's essentially the the the the developers, the new home uh companies, the new the construction companies, um the big ones in particular, doing vendor financing, but for the ultimate buyer. They're saying, "You know what? Hey, buy the house. I'll give you all the money to buy it. Take money off of the books from creditors, maybe private credit, by the way, which is insatiable these days. You know, private credit through private equity. Uh packaging this stuff up through all sorts of loans that look like they're good. And then, um doing the same thing. The same thing is happening with vendor financing. We're seeing a dramatic level of I will call it uh uh what would I call it? It's it's magic. [laughter] It's magic on on the finance, but it's also um a little bit of uh creative financial financing going on. And >> yeah, I always get worried when we're talking about the latest innovation in financing. Yep. Um, those are the things that that should make the hair in the back of your neck stand up. >> Yep. Financial engineering and creative stuff. Let's talk about what's going on in the US, the economy. And talking about the uh Philly Fed, one of the I don't know about you, but of all the Feds, I was always taught to look at in terms of their manufacturing numbers, the the actual uh monthly report. I was always told, hey, you know, Empire, not so much. This one, Philly is the one we want to focus in on. that is that has traditionally been the case. It has the longest history going back to 1968. It is the the epicenter of the chemicals industry in the United States which is uh a barometer for the wider industrial um economy. So we we definitely have always looked to the Philly first. >> So tell me what's going on there. We saw that um the current prices paid dropped a bit which means on the surface of that exact point that inflation's coming down but um tell me about kind of your thoughts about some of the components of the Philly Fed index recent report. >> Well the so the Philly Fed's most recent report was definitely um stronger than I think a lot of people had anticipated that it it would be. Um, that being said, we were all paying very close attention therefore to the the Philly Fed services sector survey that came out subsequent to that to see if there would be this kind of validation and there was not. >> So, >> what it so so for us >> I'm sorry. I'm sorry. I'm sorry. I I'm speaking about Empire. I have my I have my surveys messed up. I was wonder I was wondering what was going on there. I was a little confused. >> My my apologies. I'm sorry. >> Let's wind that back and start all over again. It's okay. We don't we don't do edits. So, what tell me about I'll give you some some high high level things and you can discuss it. Right. Philly Fed current prices dipped three points to 35.8 in October. They're only three months between 2011 2019 that came in that high though. So, pricing pressures, what does that mean for labor? What does that mean for um employment etc? What that means for labor first and foremost is that there's going to be less of it and in the sense that um O'Reilly Auto Parts for example today came out and said we're not able to get people to pay higher prices and therefore we're seeing a decrease in our sales. >> Um the biggest problem with higher prices is that companies cannot control for them. they must pay them and if they cannot pass them along to the end users then they end up having to control the only cost that they can control and that is labor and and that's why we're seeing continued layoffs and and and and increasing numbers of of cutbacks that we're seeing and and and re you know what it really has picked up here just in the last two weeks or so I would say >> what's interesting is that even though and some some economic numbers we can't get right now because of a the shutdown. But aside from that, I mean, who knows? We may have an 8% unemployment rate right now. We don't know. We don't know. Um, obviously they're kidding around. That's not going to be there. But when it comes to the orders, clearly the new orders and inventory spread in the Philly's non-manufacturing survey fell dramatically. >> Dramatically. I mean, like historically. And and that is a real cause for concern. It tells you that that demand has crumbled in a very short period of time. And then you joke a little bit less about um about whether or not the unemployment rate may unemployment rate could be appreciably higher than what we think that it is right now. >> So with that and the fact that the controlling cost can be things like employment uh or or margin compression, I don't care how you want to look at. They could do it a few different ways. they can not hire, [clears throat] not give raises, increase prices, but if increasing prices doesn't work, then they could take it on the chin if they don't want to fire people. You know, we don't know where they think the the how long this is going to be, if it's temporary, if it's a long period of time. But the bottom line is when we're seeing that these new orders for inventory and inventory spread, is that possibly also because there's a lot of pull forward and this is the impact on the back end because some of the things that everybody knew were that with all these tariffs going in, they'd have to, you know, frontr run this whole thing and that somewhere in about April or May supposedly, maybe even June was supposed to be that cut off time when okay, everything that was shipped was shipped. Everything that's coming in, no tariffs on these, then the tariffs start. to get this going. Is that possible or are we way past that? >> No, I don't think we're past it at all. In fact, if you look at other countries like Germany um who have seen their order books get just annihilated, that is indeed the it's it's the hangover effect, if you will, from all of the uh from all of the stock building that was done in anticipation of the tariffs and now the demand's not coming through on the back end. So you're seeing order books just decline incredibly whether whether or not you're talking about the the Philadelphia region and the services sector or the country of of Germany that is the world's third third largest exporting nation >> behind Nvidia [laughter] right um >> that was good that [laughter] was actually that very clever >> uh so when it so let's just kind of go through this one more time just to be clear about this so there is a hangover effect, which turns into, let's call it a collapse. But that doesn't necessarily mean, let's think of the bright side for a second, that the collapse will continue because they could pick it up on the other side unless demand just totally is gone, right? Because if we have the same demand that was continuing, they may not need to have the orders. Sales to inventory, sales to um um spreads would be what it is. But uh the question is going to be like two months down the road, right? Do all of a sudden things normalize. So >> I think that I think that that is certainly the hope right now and that's why there is so much uncertainty out there and and people are paying as close of attention as they are to things like declining credit card usage. um you know the the the the weekly data that comes out from Bank of America on their customers use of debit and credit cards that is weakening as well. So we're all kind of holding our breath right now saying are we going to be able to hit the refresh button once this stock building is burned through and are we going to have a normalization on the other side of that or is the US recession going to continue? So, US recession continue. Wait, wait, wait. Let's back it up for a second. Reel that back. That was quick. What were US recession that we were not made aware of by email or by true social post? >> Uh, well, that would be the one where uh after a very short period of time, we learned that we had a net job destruction, net job losses according to the Bureau of Labor Statistics, which usually takes years to provide us with these revisions. And yet we found out in two short months that we lost jobs in the month of June. And there's no reason given that what we've heard from individual states and adding them up subsequently from their departments of labor which are not shut down right now by the way that that June actually looks to have been even deeper in the red. A loss most likely of around 65,000 jobs if we were already losing jobs uh before the shutdown. and revisions to prior years tell us that net job destruction was also in place in the second quarter of 2024. The question we must ask right now is what's going to get us out of recession? Well, it's it's not going to be the relationship we have with other countries. You know, these great relationships supposedly that we have, you know, in Canada, talk about a an absolute uh collapse. the numbers that came out last week on the alcohol orders from various, you know, like our bourbons, our beers, our whatever we have here, right? They are not stocking those on their shelves. Not only that, if you look, I mean, it's like an 80% decline in in alcohol sales to to Canada from the US. >> That's that's nothing at the fact that they're not coming here anymore to the United States, right, >> to visit, right? And that is its own real nasty set of circumstance because we have relied so heavily because Canada is a huge ally on Canadian tourism. >> Yeah. And I live in Florida so Hollywood has been you know we used to make fun of all the Canadian drivers by the way. Um but what's interesting is this is something that from for many would be like well who needs them you know well we don't want the Asians. You know Asians aren't coming here. They're not they're not you know here and there but first of all um you know even though the dollar has come down in value it's still high comparatively for where it's been. That's where all the travel I mean everybody that I've seen the big travels like going to Asia it's going to Europe. Um they're not coming here as much and a lot of people have said you know who who needs them we need them. I mean there's some weird thing that's going on that there's this belief that somehow we are not we could stand alone. The reason we are so strong is because of the relationships that we've had over the years and the globalization trend that we've had that we have if all other countries considered every country in the world we have made out like bandits from offshoring. Now we've built up other countries like Vietnam and Indonesia and um you know that could even to a degree initially Singapore but they have their own thing going on there um and Korea >> India's India has been a huge uh beneficiary >> huge beneficiary but also every bit of the beneficiary that we give them there's a lot we get back >> of course that's called goodwill and that's why and that has benefited our our hotels our airlines um our tourism centric states and cities And yet we hear one month after another that we are not seeing um traffic pickup at all in the most tourism ccentric city in in the country which is Las Vegas. >> Right. I heard Las Vegas is awful is in bad shape. >> I was I was just there. It is like a ghost town. >> Wow. Wow. Well, the prices haven't helped either. Everything is so I' I've getting reports from a few of my friends that go to they go to the mandatory two conferences they go to each and every year in Las Vegas, for example. He says the prices are absurd in Vegas. And the old Vegas >> $3569 for two beers at the pool a few weeks ago. >> $35.69 because they charge you all kind. It's it's like buying a car between tax, title, license, and gratuitities and everything included. I mean, I was like, did I break a window? It was just a beer. >> Yeah, it it's it's a problem. And it it is getting to the point as you discussed and you first start out with the O'Reilly discussion where people are saying, you know, I can't spend anymore. I just can't do it. As a matter of fact, um so I went to the store the other day and uh the local grocery store and I usually get the I stock up on some waters and some things that you know for for the office. And uh this day I don't know why I was in there. I'm like, you know, hey, let me call the office, see what they need. So I call bring some Diet Coke in. I'm like, okay. So, I go over down to the Diet Coke aisle, which I get the cans. It was like $10.79 for a What is that? 12-pack. >> 12 pack. >> And I'm like, what? I thought there used to be a 25 cents each. So, that's a that's a what is that? A 250% 300% increase in price. And um usually I would buy a bunch of these things, right? If I was asked to buy these, I'd buy three or four of them. I'm like, you know what? I'm buying one pack. We'll go through them slowly until we can find one of those BOGO deals or whatever it is. This is not happening. So, not that everybody I'm the one that likes to diet cokes in the office, by the way. Um, so it's not like I'm saying to my staff or anybody, hey, you can't Yeah, forget it. You're not having forget coffee, forget diet, you know, bring your own. That's not what's happening. Point is, though, that I drew the line. I drew the line recently. I was having a party and I called up someone. I said, "Listen, can you get me Alaskan?" This is a little bit higher end issue. Uh, can you get me Alaskan king crab legs? cuz I got some like 6 months ago and 6 months ago they were expensive at $40 a pound for the big big ones. The really really big ones. Um yeah, let me check. Come back. $75 a pound. I'm like wait wait wait just a few months ago they were $40 a pound. I'm not paying $75 a pound. Not happening again drawing the line. And I think people are finally even for things that may be semi-necessities, whatever we call them, staples I guess we can call them, right? They're they're backing off. Yep. >> And that's where things start to be problematic. >> Oh, yeah. I mean, listen, I I have always been even before they were they were electronic, I've always been a coupon cutter since I was a child. Um, and and at this point, I wait until it is buy two, get three free on those 12 packs of Diet Coke and Coke, and I stock up when they're on sale. And otherwise, I do not buy them. I will not cross that line. >> This is an interesting situation. And you know, one of the things we note also is that we've seen a lot less um consumption by America and other countries because we've we've had a just like we did in the last term, we got to find a bad guy. We got to point a finger. We got to say China's the bad one. You know, we don't like them for all these different things they do. I found it fascinating the other day that there was a discussion from I believe the Secretary of Agriculture, I believe that's who it was. Um, whoever it was, it was a government official, I believe, was talking about how, oh my god, China is targeting our farmers. They're trying to do damage to our farmers. They're not buying the soybeans. They're not doing this. They're not doing that. This whole discussion about how China is targeting I'm thinking to myself, wait, wait, wait, wait, wait. Aren't we targeting them? Aren't we trying to cause economic harm to them in response to something? You know, that's not brought up in the discussion. Nobody wants to hear about that. That's the fact. These tariffs are causing economic harm to big companies and small companies in China, in Thailand, in wherever it else it is. Forget the stock markets. I'm just talking about the actual businesses. We saw that China's Facebook sales revenue reached a new cycle high in quarter 3, but it was this whole this inventory s surge, right? Um but yet we saw that things on the other side like borrowing fell. How does that how do you how [clears throat] do you square that? Yeah, look, um, if the demand is not there, then you're not going to see any kind of an echo in credit and the demand for credit. And that's that's a very real thing. Um, and you know, I do find it to be somewhat ironic going back to your comment about farmers who are up in arms. Don't get me wrong, I my children go to school in Indiana. I absolutely love farms and farmers, but the first time that we had a trade deal with China, they did not live up to their end of the the the commitments that they made to buy soybeans, to buy corn in the first place. Mhm. >> So this should not be coming as some gigantic shock to the system um that that China has taken the next step and bought from countries it feels are its economic allies like Brazil, like Argentina where they're buying up all of their soybeans. >> Wouldn't you do that in business? If there was somebody that was bad mouthing you on Twitter, would you send them a free subscription? >> Of course not. >> Would you? You know, isn't this a way of just And by the way, we all knew that the framework deal to buy soybeans and sorum gum or whatever that stuff is and whatever all this stuff, right, was never first had any teeth in it. Number one. Number two, it didn't have any kind of mechanism to track properly. And it third thing, just to go back to the first one, if it wasn't lived up to, there was no harm, no foul. This is all about and this all is about making a deal. That's all this is. And I wish people could see through this for once. It's all about just the fact that we got a deal. I made a deal. The the fact that we got a deal is more important than the deal. The guts of the deal. That's why nobody knows about any of the deals. We have no idea what the most of this stuff is. >> No, because to your point, there's no accountability. There's no followthrough, >> right? It's all about what happens right now, making us look good and all that. So, what is going to happen with China? Now listen, I have you been to China, by the way? >> I have. I have never been to China. Um, it's been suggested that I not go. >> Oh, why not? Well, when we had the last trade deal signed, um it was in the heat of when the global pandemic was breaking out and China insisted on having a force majour clause in the trade agreement with the United States that said that in the event of um in in the event of a global pandemic, for example, >> uh something that could not be predicted, then they would not have to live up to their end of the bargain. And lo and behold, very soon after the trade agreement was signed, then we found out that we were in the middle of a global pandemic after all. And I might or might not have said in a public venue on an interview that went viral. Uh >> oh. >> That that uh putting an act of God clause in a trade agreement with full knowledge that there actually was a pandemic was tantamount to an act of war. So, no, I I am not welcome in China, nor have I ever. >> I'd stay away from Chinese restaurants if I were you, too. By the way, with that, you know, but nonetheless, uh the the the thing in China, what I was going to mention, uh I I have driven and I've been through many many cities in China and the whole idea of ghost cities are real. I can tell you that. I can tell you that. Uh as opposed to just thinking that they were made up. Uh there was miles probably 50 miles of a run that I took. Not a run, a car drive uh that I took uh along this one particular highway and uh rows and and and rose deep of housing uh apartment complexes uh little mini cities built but nobody lives in for miles. It's you can see it. you knew what exactly was going on because there's no parking lots, no nothing. It was like half built but yet but built and that is something that has gone on. The question is um is that what's been going on with this inventory buildup? They just trying to economically keep things running when in fact they're just going to end up putting it into the dumpster on the back end. Well, and that's, you know, you've actually also seen films of of these ghost structures being bulldozed and blown up. And, you know, the latest data that we have out of China shows that that home prices are still falling uh throughout the country and that residential real estate remains extremely problematic. >> Yeah, it's and the banking system is collapsing on that as well. It's kind of interesting. Uh what do you make of the um of the recent once again instantaneous in instantaneous out banking crisis that we have with regard to auto parts distributors and auto related companies with the fraud with the inventory um accounts receivable financing that they pledged to way too many um lenders. as in a recreation of the uh Broadway play and the movie The Producers. Well, um, it is interesting that it is specifically the bankers who continue to insist that this is a one-off event and that this is not this this in no way reflects widespread um, you know, problems that you can get into when you start to finance your suppliers, which we were just talking about that with housing, weren't we? >> Yeah, we were. So, wait a minute. Let me just get something straight. Are you saying that if there was a situation that was much more uh problematic and it was much more uh what's the word I'm looking for? Uh >> widespread >> widespread that the banks >> there's too many >> that the banks would come out and they would say >> that yeah look we have a big problem. >> Well no I'm not that naive. I was I was wondering I was wondering what you were saying there. >> So you're saying >> so far so far for those of us keeping count there are 10 banks 10 count them on two hands 10 banks that have been that have been brought into this first brands orolor mess where they've had um major levels of charge offs. So if nothing else we can't and we just had another subprime lender go belly up by the way called Primal Lend. We can certainly say that at least the practice among lenders was more widespread and more problematic than what we had thought it was. And you know, look, this this is part of life. If if you want to find out where there is is smoke, there's fire, so to speak, you you you find out where things have begun and the epicenter of them, and then you just fan it on out. And that's exactly what happened with Offbalance Sheet Financing and and Enron and World Comp. We've seen these movies before and we know how they end. That was those were concerted efforts by the company of an internal management situation that they wouldn't release. What's fascinating about this is the poor and sloppy lending standards that went on for some of these banks, especially when you have multiple lenders. Uh, it's funny because they came back, a few of them said, "You know what? By the way, just to be clear, I think this was um what was the big one? What was the big one?" Uh, who who's the bank that got hit? Was it Jeffre got hit? And then >> Jeff got hit very hard. >> Who was the other bank? What was the other >> Fifth Third? >> Yeah, there's another one that was the second time. >> JP Morgan JP Morgan Chase got hit. >> There's another regional. Anyway, that regional goes and they said we did a check of our books and we re we confirmed only one, you know, we confirmed and we went out and we did the research and we see that yes, we're good now because only one account receivable pledge per account receivable. I'm thinking to myself, wait, wait, wait, wait, wait, wait, hold on a second here. That that comes back within a week. You go and do all the research within a week. Does that mean that you did not do any of this on the front end of of loaning this money out? Well, the answer clearly is they didn't, right? Or they're lying now. I don't know. Maybe both. >> That that gets you back to the whole idea of sloppy underwriting and and not the left hand not knowing what the right hand is doing. And by the way, it extends all the way to the Federal Reserve because the Federal Reserve itself had to reclassify commercial and industrial and consumer loans into this other bucket, non-depository financial institutions, which is basically lending into the shadows. The the to the tune of 300 billion dollars that they didn't know was were loans that were mclassified on bank balance sheets. So, we're we're in trouble if the regulators also don't know what's going on. >> No, I I I that's part for the course. That's part for the course. The regulators never know what's going on in my opinion. I mean, seriously, well, if it's if it's meant to be hidden or footnoted, you know, they they're they're just not they're just there's too much. And the fact is there's too much money floating around. By the way, most of it created by government and then created, you know, this is I I talked I started the show off talking about how where are or the discussion of where are we? Where are we right now? the idea that where we are right now is not much different than we were post 2009, post 2020 where somewhere along the line there was a drop in interest rates, there was more stimulus given that we had some big bill that was dropping money even though you know the the um inflation reduction act by Biden and the big beautiful bill by Trump. Both of those were stimulative in a big way. That creates a massive amount of money into the system which then therefore uh is is throwaway money where people just speculate like all hell on either meme stocks or leverage. There's more margin in the system right now. We got the reports from various players. They are the um the most margin they've ever had uh from some of the major players out there in terms of the brokerage margin. >> Oh gosh. margin debt even as a percentage of GDP has never been higher than what it is right now. And that does not include, by the way, the three times levered ETFs that you can that you can buy just to bet on one stock, but but but with triple the exposure, >> right? >> All of that leverage is not included in what we're seeing with margin um being at record highs. >> And when margin is at record highs like this and confidence is up like this, it it's always a shaky situation because the cascading effect of the downstroke is a problem. If in fact there is something that is real, not a one day wonder like we've seen, not one day that Trump is not having a meeting and now he is having a meeting and not one day that the Fed is going to, you know, keep it solid. Now he's going to decrease or whatever party is pulling the plugs here. But a lot of this also is based on government um government uh being involved. Now the you know we we've talked about and and discussed especially with the Treasury Secretary he's been talking about doing a sovereign wealth fund. Well instead of doing a sovereign wealth fund I have a better idea. Let's just give money to Intel. We'll get the price of you know the deal at a discount. We'll own a piece of it. Let's give money to MP materials. You know what? How about we give money to now quantum comput quantum computing companies and you know for in return for a grant. I mean it's almost in a weird way better. We got a big piece of the company. we get it at a huge discount. Forget the sovereign wealth fund route. Who needs that? We'll just dangle some grants out there with with taxpayer money, which by the way, I don't even know where they got the authority to do so. You know, one day we weren't involved in the capital markets. Now we are wholeheartedly. >> Yes. And that does not sound like capitalism to me at all. >> No, we were arguing for years that there was an unfair advantage by all these other countries because they have what what's called stateowned enterprises, S OE. And I'm like, that's a terrible thing. Oh my god. Could you imagine? We can't >> we need to put a sock in it, boys. >> Never in the United States. And then here they're going to buy a chunk of Intel, >> right? It's absurd. It's just totally absurd. And and everybody makes it think like there's nothing wrong with this. >> Oh, we did. Well, you know what? They're doing it. We're going to do it, too. Wait a second. It wasn't good to begin with. That doesn't give us the green light to do this. It's I Danielle. It's so frustrating. you know that >> I mean our parents always said that's not an excuse but but but such and such's parents are allowing them to and you're like okay you're still going to fall off the roof and break break major limbs that doesn't make it okay. >> Yeah. Crazy what's going on. Tell me a little bit about what the things you've been doing over at uh at your company and tell people where they can get over and find Quill Intelligence. We'll have this over on the show notes for episode number 944. But tell me >> I you know should I I I'm I'm hereby placing my request to be episode number 1000 first of all. >> Oh >> um >> we could do that. >> Well yeah we can do that. >> Look at you almost a thousand. >> Um >> in any event uh yes please come to dartinob.substack.com. We have a very loyal following with our daily feather readers. We publish every single trading day of the of the year whether the government is shut down or not. we we were always looking at alternative data sets and thank heavens for that because we didn't have to play as much catchup as some other research houses have. Um but anyways, yes, dartinobooth.substack.com. If you run institutional money, come to qi research. I would love to personally talk to you about that. Um and if you don't already follow me on what used to be known as Twitter, please do so at D Martino Booth, >> formerly known as Twitter. Well, thank you so much as always. a very insightful and a very uh I I you know what I don't know what it is, but I always I always uh my my it's you bring uh good stuff out and uh I find it to be a a real little bit of rebel rousing that we do here, but also some some real truth and some facts. So, I appreciate that. >> Anytime. >> All right, we'll talk to you soon. Thanks. >> Take care. Bye. And that's going to wrap it up for this episode of the Disciplined Investor podcast. Next week coming up uh right before Thanks, not Thanksgiving, right before Halloween. Vitali Katen Nelson and then we have Manuel Bla, Ross Gerber is coming back, Tim Knight uh in mid November, and then a whole bunch of guests as a matter of fact uh trying to uh button up a couple of people, but we have some wonderful guests coming on and a bonus episode in the next couple of weeks as well. uh talking about some ESG and a few things that we're going to tack on to the back of one of our other shows coming up. Uh listen to DH Unplugged, go over to the discipline investor and uh let's just get it going. Thanks for uh being there. Thanks for your support and uh hope to see you uh next week. We're going to have a good time with it. See you soon. This podcast is intended forformational purposes [music] only and does not constitute personalized investment advice. 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