Welcome to another episode of the Chicks on the Right podcast where we talk to our friend and sponsor of the show, Zach Abraham from Bulwark Capital Management. And there's always chitter chatter in the market from experts that a recession is coming, or a recession isn't coming or whatever. The how the economy is doing is always up a topic of debate, and right now there are grumblings about
a potential recession. And apparently there are signs that don't have anything to do with actual economic indicators that do indicate recessions that we are just learning about. This is according to an article at NPR. So some of the most famous unofficial indicators include maybe you've heard of this, the hemline index, never heard? Have you heard of this?
I have you have? Really isn't a thing.
So apparently shorter skirts equals good economy, Longer skirts equals a down term.
Why I don't get that. I don't know. It actually goes another way.
You can look at you can look at suit sales. So in Boom Times the Cell, the sale of men's suits go down. In recessions, they start going back up.
Oh my gosh.
Yeah, it's a lot of weird It's one of the thought fascinating things about economics and markets, and it's one of the reasons I fell in love with them. There's there's so much human behavior involved and people don't really realize that psychology. Yeah, yeah, so so think of like, so an easy way to think about it is like the Roaring twenties, right, and the and the what do they they what I'm blanking out the flappers?
Flappers?
Yeah right, okay, remember that was like those skirts were short back then, and that was out there, right.
It was an economic boom.
Time things are good, people are feeling loose, right, They've got extra money, they're drinking more, they're partying, right, all that kind of stuff, and so when bad times hit, you're not as worried about where you're going on a Friday night. You're worried about you know what I mean. So, yeah, it's it's it's a really fascinating thing.
So interesting. The first four I had.
Had into that was seeing men's suit sales up against the economy, and I remember just going that is wild.
Well, they say it's true about men's underwear sales also, because if underwear sales drop, apparently, then that means people are cutting back on even their basic essentials, which that makes sense to me. That the short skirts and the long skirts, that's a little bit more difficult to wrap my head around. But the you know, giving up essentials and buying less essentials, that makes sense to me. And apparently frozen pizza sales, that's.
That's what was really interesting to me.
Too, that because yeah, comfort food spikes. When budgets are tighter, you reach for the comfort food more and probably just junk food because it's cheaper, right right.
Well, that the minu you said that, I thought, you know what, that's a great one because you're doing that instead of ordering, yeah, instead of ordering a pizza totally like and how many fans. That's probably actually a very good indicator. I'm actually gonna have one of Miami think about it.
Think about all the times that you're like, Mom, I want McDonald's.
She's like, we have McDonald's at home. Yep, we really don't. Ever, we really don't have.
We have your you're lame burger that you're going to.
Like try to put special sauce on hold on in my house.
My kids are like, oh, it's not the same, And I'm like, dude, we've got woggy ground beef for.
Oh my god.
And I'm sitting there just know McDonald's. I'm like, your don right McDonald's. Man, this isn't going to kill you, right No? So yeah, no, that that's legit though there's it's just it's member markets's made up of people.
And so what are the like the actual ones that are actually legit economic indicators?
Like what do you look for in your world?
What do you what do you see that you're like, uh oh, I don't like that sign.
So that's changed a lot.
Prior to the last ten years, well actually prior to last five years, I would have told you that the most dependable metric is the yield curve, which means what is the so like, if we're looking at a two year US government treasury and a thirty year US government treasury, what is the space between them? Where's the ten you're at? Where's all these things at? And in the past, whenever you'd see the yield curve go flat, which means you'd have a thirty year trading paying a very similar amount
of interest to like a two year treasury. That was a precursor and then the last stage right before you entered recession, you'd actually invert, so you'd have two year yield would be higher than a thirty year. It is actually the two in the ten we're the most. The two in the ten year were for the most. But literally those indicators had predicted every single recession in the history of our economy with perfect record. Right, it didn't this last time and is the first time it broke.
But it makes all the sense in the world because what did we start after two thousand and eight. Two thousand and nine we started doing quantitative easing, which is effectively the FED controlling the yield curve.
So one of the things that we.
Were worried about is we were like, we don't know if we can trust this indicator anymore, because this indicator used to tell us exactly what investors wanted. And one of our big believers of the reason the yield curve would invert is because when you go into recessions, interest rates go down and bonds go up in value. Well the longer the duration of your bond, So if interest rates go down, the value of your thirty year bond is going to go up a lot more than the value of your five year bond.
Okay. So my thought was.
Always the reason you see the yield curve invert is because smart money is selling stocks and buying long dated bonds, right, and so that's kind of telling you the smart money's getting out of the game.
Look at the yield on the thirty year it's dropping.
That means people are buying it, and that means that they're going to ride this thing out, wait till stocks get knocked down, and then step back in there and.
Buy them cheaper. So are because they Well, no, because I don't.
Because that indicator, because I believe because of what the FED had done for the last fifteen years, it broke. It doesn't tell us anything. But what I will say is that I have never seen and I'm not trying to alarm anybody, but unless something changes drastically and extraordinarily fast, you're looking at a one hundred percent certainty of a global recession.
Okay, just book it.
You're you're looking at a situation right now that's pernicious enough to where you may be hearing about people not able to get an MRI in the next three months because you need helium.
You need helium for MRIs.
Okay, our helium supplies are going to zero because it's a distill it it gets produced, it's a byproduct of distilling petroleum.
Okay.
Aluminum shot up through the roof because they hit an aluminum refinery in Israel.
Okay. So like there's damage.
Being done to the global economy that cannot get undone. Like everybody's saying always this gonna get is this gonna get bad?
It's horrible right now.
Our our markets are sleep walking through this, okay, Like this stock market is gonna get hammered.
And we're not hearing about it, like this is this is.
It's the it's the look the analogy I use the other day as I was like, this would be like if the stock market had not dropped significantly two weeks into lockdowns in COVID, this is the greatest shock in energy markets in history.
And it's not It's not close.
I know we've been I've been trying to like ring the alarm bell now for weeks and everybody's like, is it gonna get bad? And I'm like, is it? People are gonna die, Like hundreds of people will die from this, if not millions. You've got Australia right now, their farmers are not planting, they're out of diesel. Oh okay, Like you're gonna have food shortages. You're gonna I'm just telling people, like, and here's the deal. If if Trump were, if they were to walk away today and open up the straight,
a lot of this stuff's already gonna happen anyway. But every single day the straight is closed, you are compounding this pain on the back end and everybody's sleepwalking through it. And I'm sitting there going, this is nuts. This is nuts. I've never seen anything this crazy in my career. And you need to be very careful. I will, like, you're in an environment right now where literally, if the stock market drop fifteen percent in the next ten days, that would make a lot more sense.
Than what's going on right now. So wow, I mean you can literally just do it.
And I can sit there and go, okay, we're oil is going to be higher for longer. This is going to hit earnings SMP like, and you're going, okay, we know that there's been this much damage done.
Then you look at the market and you're like, what, like, what are you what are you guys doing? Oh my god, this is bad, guys, It's really bad.
And no one's talking about it, and I don't think people You're like, oh, hell's this going to affect tech, And you're like.
It affects ever guys.
Yeah, Like one of their biggest costs now is going to be the energy to drive these data centers. Their energy costs just doubled, like like no one paying attention.
It's really scary. Currently the biggest recession indicator is you, well, no, I'm not taking it. Yeah, but I just talk this.
So we we in the industry, like, so people like me that manage money, we're talking about it and just nobody's listening and we're looking around at each other.
Let me let me this is just this is straight legit, Okay.
So we used to talk about in the energy market the straight of horror moves being closed was the equivalent of an atomic bomb going off somewhere in the world.
Meaning oh my god.
That we always looked at that as a worst case scenario in energy markets. I mean, I'm talking for decades like this isn't I Ran I Ran did a similar thing back in nineteen eighty, but we hadn't they we have threatened straight closures before twenty percent of global oil supply comes out of there every single day and you can't just reroute it. There's no way to inject it back in. And so like, for instance, if we undid this today, everybody's like the problem to be over. No,
you've had production shut ins. So even if you unlock the straight ohor moves today, we're only producing ninety percent of what we need. Wow, global oil storages are almost zero.
Okay, I'm I regret having this conversation.
And here's the crazy thing.
Here's the crazy thing. Like I told you, we're up fifteen percent, and that's our main this is this is gonna be.
All we did is we just bought a bunch of oil and natural gas companies that were super cheap, paying good dividends, and we own some goal. That's why we're up fifteen percent. Gold positions have been hit a little bit, but the energy side of it's carried through. And everybody's like, why'd you load up on energy?
And I'm like, they just close the straight guys, like the bomb went off right, Like yeah, and it's just and these things were cheap anyway, paying us solid dividends.
You're like, okay, I'll take that. Okay, it's not good.
It was horrible, But like, this is what makes me glad that you do these webinars, and that's when you are telling people who wouldn't ordinarily hear it from the news what's going on. And this is why we're constantly telling our audience, I need to be paying attention and going to these free webinars. How can people find them and find you?
H Yeah, Bullworkcapitalmanagement dot Com. The other thing is, again not trying to too my own horn, but we've been pounding the table on this on our daily show.
Yeah Daily Dots on YouTube. Just go look for Know Your Risk podcasts on YouTube. We got our video feed up there every day. We're on every podcast station.
But I'm really not saying that to pump our own thing, but we really make a focused effort to have on specialists, Like we had probably one of the pre eminent oil specialists in the world on a week and a half ago and we did a long form interview with him and he walked through this whole thing.
So we're not getting this news from news anchors on TV.
They don't know anything, right, So we're actually trying to bring you the So if you want to know how we deal with it. Af you're one of our clients, sign up for the roadshow Bullworkcapital Management dot com. But if you want to hear what's really going on in the world, just google Know Your Risk podcast and you'll find us.
No problem awesome.
Thank you, Zank, you Zach for Thank you, ladies pressing us the best Love It.
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