This Is What "ALWAYS" Happens Before A Depression

Summary

Highlights

• Mixed economic signals make it hard to pinpoint the state of the economy right now. 🎢
• Consumers are financially strained, highlighted by rising default rates on digital payment plans. 📉
• AI's rise is transforming marketing and business practices, reducing the need for traditional roles. 🤖
• Global economic changes, particularly tariffs and weakened currency, are shaking markets. 💱
• Despite pressures, consumer spending remains high, indicating habits aren't changing much. 🛍️
• Uncertainty in the market is freezing real estate actions and corporate expansions. 🏢
• Automation is stepping up, potentially impacting employment as industries evolve. ⚙️

Key Takeaways

• The economy is full of mixed signals right now, from fluctuating stock and crypto markets to changing consumer behaviors. 📉📈
• Rising default rates on consumer payment plans like Apple Pay Later indicate consumers are financially squeezed. 🚨
• The adoption of AI is changing business practices, especially in content creation and marketing. 🤖
• Global economic policies, like tariffs and currency valuation fears, play a crucial role in current market fluctuations. 🌎
• Consumer behavior isn’t shifting drastically despite economic pressures, maintaining high spending habits. 💳
• The possibility of stagflation looms as inflation and unemployment rates could rise simultaneously. ⚠️
• There's a significant shift towards automation across industries, leaving many concerns about job security. 🤔
• The looming recession is causing real estate and corporate expansions to freeze, with many uncertainties. 🏘️

Overview

Chapters

• 00:00 - 01:30: Introduction to Economic Signals and Consumer Behavior The chapter discusses the current mixed signals in the economy. The stock market and cryptocurrencies have experienced fluctuations, while companies like Walmart are adjusting prices to attract customers facing financial strain. Meanwhile, establishments like Starbucks are still drawing crowds, indicating consumer behavior. The narrative expresses the confusion surrounding the economic indicators and consumer responses in the real economy.
• 01:30 - 03:00: Concerns over the US Dollar and International Trade The chapter titled 'Concerns over the US Dollar and International Trade' discusses the significance and stability of the US dollar as a safe haven currency amid international trade concerns. It mentions the contradictory consumer behaviors such as major retailers like Walmart lowering prices despite ongoing economic and tariff challenges. The chapter highlights the interplay between currency, consumer behavior, and international trade policies.
• 03:00 - 04:30: Impact of AI on Job Market and Consumer Spending The chapter discusses the apparent contrast between the perceived state of the economy and actual consumer behavior. It highlights personal experiences of people going out to restaurants, indicating high consumer spending, which seems inconsistent with recessionary conditions. The chapter raises the question of whether current economic conditions might be a temporary bubble, particularly in certain affluent areas like Scottsdale and Miami.
• 04:30 - 06:00: Shifts in Payment Behavior and Inflation Concerns The chapter discusses economic trends and consumer behavior, focusing on the South Beach area. It highlights that real estate is down and many restaurants have closed, indicating economic strain. Additionally, there is mention of consumers facing financial difficulties, with silent layoffs contributing to the issue.
• 06:00 - 07:30: Real Estate Market Uncertainty and Financial Predictions The chapter discusses a marketing conference attended by experts from major companies like Spotify and Athletic Greens. The attendees noted a significant shift within agencies from traditional content writing towards utilizing AI technologies, such as chat GPT, to enhance their marketing strategies. The dialogue highlights the growing importance and influence of AI in the marketing sector.
• 07:30 - 09:00: Global Trade, Tariffs, and Economic Strategies The chapter discusses global trade, tariffs, and the economic strategies involved. It highlights consumer spending habits and behaviors during economic downturns, specifically pointing out that people are used to spending consistently. The conversation also touches upon modern payment programs such as Apple Pay and Apple Pay Later, suggesting a shift in how consumers interact with economic mechanisms.
• 09:00 - 10:30: Inflation, Consumer Behavior, and Debt The chapter discusses how consumers are increasingly using alternative payment methods like Flax for rent and Apple Pay later for groceries. This shift in consumer behavior is leading to more defaults, highlighting potential inflationary pressures and increased consumer debt. The conversation suggests an awareness of these trends among the discussion participants.
• 10:30 - 12:00: Potential Stagflation and Economic Policies The chapter discusses the increasing delinquency rates among people using certain programs, rising from 32% to 41% in the past year. It highlights the sequence of payment options beginning with cash payment, followed by paying with a credit card, and finally financing a purchase over time similar to credit card usage. This suggests a concerning economic trajectory as more individuals are delayed or unable to meet their financial obligations, hinting at potential stagflation and the need for careful economic policies.
• 12:00 - 13:30: Currency Wars and Economic Strategies The chapter discusses unique financial strategies in the evolving economic landscape. It highlights the introduction of innovative financing programs that directly fund tenants, which is unprecedented in the real estate market. This shift is attributed to the disparity between rapid economic growth and slower wage increases. Overall, it explores the adaptation required in economic strategies to accommodate these new financial paradigms.
• 13:30 - 15:00: Conclusion and Future Economic Considerations The chapter delves into the analysis of consumer behavior and its impact on the economy. It emphasizes that cultural factors heavily influence people’s spending habits, pointing out that consumers often purchase goods regardless of their financial circumstances, such as income level. The discussion highlights the significant challenge posed by rising credit card debt coupled with declining savings rates. This trend raises concern about the long-term economic implications, stressing the importance of understanding consumer behavior to forecast future economic conditions. Furthermore, there is a mention of political influences, such as policies proposed by Trump, suggesting they were part of a broader discussion on economic strategies. The chapter concludes by considering the cultural and behavioral factors as crucial to understanding and predicting future economic trends.

This Is What "ALWAYS" Happens Before A Depression Transcription

• 00:00 - 00:30 The economy is sending a lot of mixed signals right now. You have the stock market and crypto down and now back up. You have Walmart lowering prices to attract squeezed customers. And you know, you have a line out the door at Starbucks every morning. So, what is hype and what's happening in the real economy? Yeah, I I'm telling you, it's confusing right now. I I mean I just watched a video this weekend about, you know, how how badly has Trump damaged
• 00:30 - 01:00 the dollar, right? Like that's a real concern. You know, now we have these countries that um I think I I I don't think people we can underestimate the the safe haven of the US dollar, right? And so we have that as well. And of course the tariffs, we need to mention those. Oh, absolutely. you know, um I think it's interesting, you know, that we have these contradictory consumer behaviors. You know, you have Walmart lowering prices, yet you have people,
• 01:00 - 01:30 you know, you and I went to a restaurant, two restaurants this weekend, Friday and Saturday night. You know, we couldn't get reservations into either one days before. We had to call the people we knew to get us in. And you know, that's not recession a recessionary economy. Sometimes I wonder if we're just in a little bit of a bubble, you know, like like you know what I mean? Like Scottdale is I was just in Miami last week uh for a YPO conference. Um and um you know, however,
• 01:30 - 02:00 you know, you you take a look at what's going on in that South Beach. Um that area is down. So the real estate's down. There's there's u lots of restaurants. I was eating with a bunch of locals and they said there's a lot of restaurants that have gone out of business. Um so you know we are seeing what we're seeing here but um I think the consumer is getting whacked personally and it certainly is showing up. There's a lot of u kind of silent layoffs happening
• 02:00 - 02:30 right now and and by the way AI um this this conference I was at was a marketing conference and we had some really really big big people there like Spotify, Athletic Greens or AG. Um these are some some and some of the best marketing people in the world and we have uh lots and lots of agencies are are moving away from uh you know content writing and things like that and they're moving into chat GPT and AI for a number of things.
• 02:30 - 03:00 Yeah. No, I would agree with you but I still think consumer behavior you know it's interesting because you know we haven't been in a downturn in such a long time. People are very used to spending right. So, there's certain spending habits that, you know, people aren't necessarily changing. Well, that article you sent me last week about the uh pay later stuff, that's very interesting. So, so you guys probably know the there's Apple Pay and there's Apple Pay later and there's all these different kinds of programs out there
• 03:00 - 03:30 like Flax. We use flax for our rent where um you know they the flex will pay our rent and then they'll they'll go after the consumer for payments. Essentially people are doing this with groceries and this is hopefully this isn't new for uh information for a lot of you guys but uh you start to see these things uh when when people are starting to use Apple Pay later for groceries and and uh those kinds of things and now they're starting to default. So I think uh didn't you say
• 03:30 - 04:00 40% of the people on some of these programs are actually delinquent or late? Well, yeah. In the past year they've been delinquent or late. So that's up from it's at 41% up from 32% last year. So just look at the waterfall there though, right? Because remember one I guess pay cash, two pay on a credit card, three finance a purchase over time just kind of like a credit card. Um, and uh, when it starts to move down the line from, you know, I
• 04:00 - 04:30 guess like a vehicle to to food, it's a very very different scenario or rent, it's a very different scenario. We we've never I in my life of have ever having um, all the real estate stuff that I've ever owned, I've never seen a program that finances a tenant, right? And uh, those are new. And so, you know, and that's a direct result of of um the economy growing faster than wage growth.
• 04:30 - 05:00 Yeah. But I also think it's cultural, too. I I I don't just think it's that. I think that it's people want what they want and they're going to buy it. And I think that they don't care if they have the money for it. And I don't think that it would matter if they made 20,000 more a year. Consumer behavior. Yeah. Yeah. Credit card debt is at all-time high. That's true. and and savings is at an all-time low. You know what's funny? I was having this conversation last night with the guy sitting next to me at that dinner we were at and uh you know, I was saying, you know, Trump is trying to get
• 05:00 - 05:30 really good jobs back into this economy and he's trying to make it so that you make better wages and you can buy things like a home and you can save money and you can invest. But at the end of the day, you know, in order to do that, the price of stuff has to go up. If we're going to make it in America, it's going to be much more expensive, right? And I was talking to him like, I don't know if people want that. Like, I don't know if you know that people want, okay, you don't won't spend your money on frivolous things and now you can make
• 05:30 - 06:00 enough money to save and buy a house, but yet you can't go shop on Sheen and all this stuff and buy a different outfit every week or buy, you know, multiple like random things, right? And I just don't know if that's what people want in this culture. I just think people would rather buy stuff all day long and rent than be, you know, buy a house. I mean, well, I was thinking about like I get the made in America thing and I I get the reason for the tariffs and and all that. I know it's super controversial. I get all that. Um I don't know how it's going to end up,
• 06:00 - 06:30 but definitely I know some people just don't think it's going to be inflationary at all. I just don't see how it can't be like you know but regardless of that you start to look at these um you know call these international websites right like Alibaba and Amazon um you know people are already buying stuff from out of the country it's going to be very interesting to see um how all this is going to going to play out you know and also I I I saw this um report
• 06:30 - 07:00 about the amount of money that um it spiked like crazy u that that uh the customs is is getting now for stuff coming into the US. It it jumped like crazy like uh you know it's at an all-time high already just for the month of April and and so it we're already seeing that kind of revenue uh hit and it it has to translate into higher price consumer goods. Absolutely. you know,
• 07:00 - 07:30 and I think the big word right now is uncertainty, right? Like everything's uncertain, so everything is frozen. So like we're not seeing much difference in the consumer purchasing from the tariffs, but you are seeing the fact that we could enter a recession. There's a possibility even though the numbers aren't showing that yet. We might be in one. Yeah. I mean, we, you know, we have to see what the GDP growth is after this next quarter. We totally could, but but um right now you're seeing the real
• 07:30 - 08:00 estate market frozen in most markets. Like nothing's moving because I think buyers are wondering, you know, I don't want to buy right before the market tanks, right? But then sellers aren't necessarily lowering the prices because they're not forced to sell anything. And then you see the same thing in corporations, you know, like no corporations expanding right now. Everything's just kind of frozen. I was talking to a commercial lender over the weekend and we were emailing back and forth um and I chatted with him last week and and and I said what's you know
• 08:00 - 08:30 why aren't we seeing more defaults and what he told me was that um the first kind of stage is working with the the borrower and you know what what he called extended pretend right and that can go on for a while he said But he that's now starting to be over. In fact, I'm going to call him today or tomorrow. Um and and he said a lot of times they're, you know, they did all
• 08:30 - 09:00 kinds of things to to not have them in into default, technical default. Well, um the economy hasn't gotten that much better, right? And so um so his prediction was is that you'll start to see um some of these things emerge this year and next year as a result of um okay we've kind of had enough. It's time to you know go mark to market on some of these deals. And I think that's um so I think you know the the the first the first trunch is everybody's trying to
• 09:00 - 09:30 figure it out. To your point there's a lot of uncertainty and I and I think um you I just want to address a couple things. I think that um you know this this this dollar the US dollar um is the world's currency and and you know it's at what it's at its weakest point right now and so so if I'm if you're China and I'm buying something from you I'm paying you in US dollars and if the dollar is getting weaker you're looking at me going well why
• 09:30 - 10:00 would I take those you know that like the dollar is getting weaker And so, um, why is this important? It's important because our trading partners historically have, um, the dollar has been a bit of a safe haven. And so, this is a big issue. And so, why is it important? It's important because this is precisely why I think that we're starting to see a run on gold, as an example, because there's going to be a flight to um, you know, there's going to
• 10:00 - 10:30 be a flight out of dollars. Maybe, no, no, maybe not completely. Maybe it's a short short uh time, but uh we're we're already seeing this. I I looked at gold's like up over at 3,500 an ounce now. And it was only it was like 2500 not very long ago. Oh, there you are, Jerry. Thanks. Um yeah, and what is that? Uh is that for a week or how long is that? One day. Go back to six months. Click on the six months up top there. Um and then Yeah. So there you go. Look at
• 10:30 - 11:00 that, guys. So take a look at gold. Uh can everybody see that? Uh okay, great. So um now this is I think this is a uh this is a flight out of dollars. And to to your point to Neil, what happens is when you start seeing other countries um you know concerned about the safe dollar, uh you're going to you're going to see all kinds of of u fluctuations like this in in other types of assets.
• 11:00 - 11:30 So the question is is you know will the dollar lose its reserve currency anytime soon. Um I don't think so personally. Um it it takes a lot you know and and obviously the is it the remmanb that in China I think is um uh you know the one that everybody kind of moves to but there's there's just no possible way based on the the you don't think a lot of people really trust the government. They don't have the rule of law. There's a whole bunch of things um around that. So, so people are frustrated right now
• 11:30 - 12:00 and there's uncertainty and I don't know if we can ever pull that back. Um, and and this is an important thing because the I think the US has historically been a good trading partner and I think that this is in jeopardy right now through all these kinds of things. Yeah, absolutely. And I think the next uh you know some you know the next rock to fall will be you know the uh decrease in staff right so I think that corporations right now a lot of
• 12:00 - 12:30 them are doing hiring freezes but we're not seeing a ton of layoffs yet but if things don't pick up that's kind of going to be the next step. Well I I think inflation too I you know there the there's already indications that inflation's going to be a bit of an issue. Yeah. But you have companies like Walmart and Target coming out saying they're cutting prices on a bunch of their items. And Chipotle is coming out saying that they're not going to increase prices with the tariffs. So what that means is the corporations are
• 12:30 - 13:00 going to be absorbing the cost. And if a corporation is going to be absorbing a cost, it's got to cut cost in other places. And I think those costs will come from staffing. Yeah. Yeah. They they'll try to be all automated. I know the other day I was I can't remember where I was. I was flying through Oh, I was on my way to uh Sedona and I stopped uh cuz I got up early and and I pulled into a McDonald's and I went in there just to just to get some hot coffee and um it was a kiosk like I was like what?
• 13:00 - 13:30 it was full kiosk and um and then um you know so I think you're going to start to see more and more and more of this where um you know that is one obviously one way that um u food service can certainly be automated not completely of course but it's a big one I want to look at the inflation trends too because I think you have a dual dynamic there so you're having you know these larger companies are able to decrease prices because they have a hold on the market So they're
• 13:30 - 14:00 basically going to tell the company that they buy from, if you can't make it for X cost, then we're going to find a different company, right? So they're going to give them that discount. Really, the small business is going to take a big hit, too, on their pricing, too. But these smaller companies, they're going to take a bigger hit because they can't absorb the cost. They don't have a big staff. So, they're going to have to raise prices on the consumer. So, I think you going to you are going to see some things deflate and some things inflate. And I you know the other thing is is uh we have I have ton
• 14:00 - 14:30 of friends in manufacturing and I I if you guys haven't gone out and looked at this you should but um the way the tariffs are going to roll out it looks like at least that's um um there's there's a lot of u data around this is it's going to be um they're going to put categories the countries into categories of green, yellow and red. So you know just like a stoplight. So green means that they're um you know friendly with us right yellow is you know tentative
• 14:30 - 15:00 and red of course it would be that would be like where China is as an example um and and so you're going to have different kind of measurements based on those and so the reason why I'm bringing this up if if you just type this in you'll you'll find it uh there's tons and tons and tons of information on this including some really really good YouTube videos on which countries are going to go into those buckets. market. Um, and this is apparently at the moment how these tariffs are going to roll out. Now, what that means is the
• 15:00 - 15:30 manufacturers, some of my friends have already moved some of their stuff to like Vietnam, um, as an example, um, because they're in the green bucket. Um, so if something's made in China, they might move it to Vietnam as an example because the tariff is going to be less there. So, um, all this stuff is playing out right now, too. So if if you're a if you're a business owner and you're you're doing business somewhere and your consumer is the US, you're trying to figure out right now where can I have
• 15:30 - 16:00 this made for as little as possible. Um and of course Trump's trying to make it in the US, but there's all kinds of workarounds on this stuff. people are there's all kinds of loopholes if you will in the way the manufacturers are are doing this even on the luxury goods where it's they're being made in another country but being assembled let's say in France or in Italy or wherever it might be even in the US um I have a manufacturing friend that's actually doing that it's actually the
• 16:00 - 16:30 parts are being made somewhere else being shipped to the US and then it's being assembled here um and then it's is made in the US so is it really you know do they put They put a made in the US sticker on it, but really um the components are all over the place. And so this is this is what's being un unraveled right now. I think something else that we can't ignore is the consumer behavior contradictions, right? So you have uh line out the door at Starbucks, but then you have airliners
• 16:30 - 17:00 lowering their ticket prices because not as many people are traveling, right? And so you have to look at that and I I think what it comes down to is the widening class divide. So, you kind of mentioned that being in Scottsdale. Are we in a bubble? You know, I don't think we're in a bubble, but I do think that you have, you know, a big gap between those that bought and owned pre2021 and those that bought and owned after 2021 because or rented. Yes. But but not just for real estate in general because if
• 17:00 - 17:30 somebody locked in a low mortgage rate, then the rest of this inflation they're more easily able to absorb because their house payment is so low. But if they're renting or they bought, you know, recently and they have a really high house payment and they have all these inflated goods, they're much more squeezed. Yeah. I think this is the time, guys, where you want to accumulate cash in my opinion. Um, you know, you want to have reserves because we don't know obviously where all this is headed. Um and the the and to your point, Denal,
• 17:30 - 18:00 if um not everyone is physically responsible, you know, u we've we've seen this before. I mean, if if you just look at the STEMI checks that people got, they were gone within two years. That money, if you just look at the savings rate before the STEMI checks, after the STEMI checks, and you see how quickly it peaked and how quickly it went away. Um now, not saying that they didn't use them for things that they needed. uh obviously because the economy was shut down too. However, um but the
• 18:00 - 18:30 the savings rate is a is a very very the savings rate and the credit card delinquents and the and the credit card amount which is well in the well over a trillion now um just past that not not even a year ago um is is out of control right now and people are getting squeezed but they're not changing their behaviors and and that's the issue. Yeah. And Wall-Ally said, you know, we have been in a recession. That said, we're approaching stagflation. I'm old. Live through the 70s. One thing to have
• 18:30 - 19:00 cash to buy um at a high price, another not to have a job or money to buy necessities. So, you know, that stagflation thing could be a real thing. I mean, that could really happen. I mean, people talk about inflation, they talk about deflation, but you know, if Pal doesn't lower rates and get the economy going, we could have stagflation. It's possible. And um you know what if we probably are going to see higher
• 19:00 - 19:30 unemployment um and we're definitely going to see higher inflation in my opinion. So, right to your point. Yeah. Um, and if those two things happen, um, then we could see a real rattling. I thought was what was really interesting is the way Trump went after Powell, um, this last week about, um, lowering the interest rate and, you know, he basically, it's funny because he's he basically is looking for a way to get rid of him. Now, the interesting thing is Pal didn't
• 19:30 - 20:00 back down. He just kept the rates where they were. Trump wants rates down. Yeah. But Trump walked back the statements that he was going to fire Pal because that would have been horrible for the markets. Oh, it would have been. But what's interesting is that Pal actually gets Trump gets to appoint his own person in May of 26. So, uh, Pal's only there for, you know, call it another year. Um, then he actually moves, I believe, into being a a governor, right? Um, so he'll still be on the board, but won't be in charge,
• 20:00 - 20:30 but Trump's going to have his person in charge in a year. That's a really good, you know, point because if Trump gets to pick his person and that person embraces inflation because basically lowering rates is an embracement of inflation. Um, you know, it'll be interesting to see. It's a good place to be at if you're in real estate or if you're in, you know, hard assets. Well, and the one of the reasons why he wants rates down in my opinion is because if rates go
• 20:30 - 21:00 down, um things will start to get consumed again. Um it'll help GDP um and it'll mask what I think is going to be um inflation that's coming from, you know, some of these tariffs and things that are that are in motion. Um you know, there's a there's a lag to all of this. There's a lag. I you know I think with the real estate markets and like the bond rates are you know they can only do so you know the Fed can only do so much for what the actual rates are depending on you know
• 21:00 - 21:30 yeah the 10 years so I mean right right no it's true and I think that's the you know the bond market is actually something else that's extremely interesting u most people probably don't pay too much attention about but the the reality is is that the the there's there's there is a potential and this is back to that dollar issue that I brought up before that if if there's a flight from the the bonds um you know it it's
• 21:30 - 22:00 it's going to be disruptive. It's actually going to it's going to it's going to uh take a crack uh against the GDP um you know because a lot of our our bonds are held by by foreign interests and so I know one of the you know if this is confusing I'm with you guys. So, I'm trying to figure it out just like you. And what's really cool, Jerry, if you want to put up Limitless, um guys, we are um you know, I I got Jim Records coming
• 22:00 - 22:30 this year, guys. So, uh we haven't really announced it yet. You guys are the first to know. Um he wrote a book called Currency Wars. Uh he's written a bunch of books. Um he he just I just read the most recent one that's about uh uh G uh chat GBT and money. um you know and and obviously we just raised the price for the Liis Libilus Expo. It went up over the weekend, but because you guys are watching this live stream, uh we'll give you a last chance to to lock in at the old price if you want. You can
• 22:30 - 23:00 save over 700 bucks off the full ticket price. Uh just just hit the code last chance when you check out. Um and uh I'll see you guys in Dallas in July. But you know, we're I'm in the process of confirming Jim Records right now. he's agreed via text and email. Um, and uh, that's going to be huge because this is a guy that really understands what's going on. Um, you know, he wrote a book called Currency Wars. And I I actually think this is where we're headed. Um, you know, because if if I'm a foreign
• 23:00 - 23:30 country, the the reality is is do I want US dollars to be paid in? I mean, that's a real concern. Absolutely. So, uh, so we've got Jim coming this year. It's going to be super exciting. So Wesley uh wants to is stating 40% on buy now pay later users have reported missing payments in the last year. And then also student loans are coming to a head as well. And a lot of these people that have the buy now pay later probably also have student loan debt. You could Yeah,
• 23:30 - 24:00 that's another one. You're right. Yeah. Trump's like you guys owe right. Yeah. So that was another one. I'm sure it pissed a lot of people off. But um so yeah, I tell you what, all this stuff is kind of coming to a head. The the interesting thing is is um you know, those are the people that don't really have traction yet, right? Like like a lot of these folks don't own assets, right? Um and you know, sometimes those those kinds of things can can save you and help you at least, right? If you have something if you're invested in
• 24:00 - 24:30 hard assets and you have a lot of equity, at least you have that as a fallback. you don't really want to use it. Nobody wants to sell a home or an asset and scoop the equity to pay stuff. But um you know that is the there's a big difference between uh uh you know most students that have student debt coming out of college maybe just trying to figure stuff out or getting whacked by inflation of student debt and of course these these pay later things. And um mo um and I I actually think this is
• 24:30 - 25:00 all going to get even worse um with the with the AI and the um you know the chat GPT and all that stuff. I'm telling you guys the automation that's going on like um like we have full plants today. You go in there's no workers there. It's all robotic all of it. So you know it's already here right? Certainly outside of the US it's here. Um, and so that's all coming. You know, when you can build a whole factory to to to manufacture
• 25:00 - 25:30 things and you don't really need a lot of people, um, you know, we should be taking note of that. Absolutely. And thank you guys for tuning in and we will see you next week. Thanks, guys.