One reason the stock market is near all-time highs is because of all the new investors that are buying and pushing up prices. Is this a good thing? Karl Eggerss joined Trey Ware to discuss.
Trey Ware: All right, let’s go to the Stevens Roofing newsmaker hotline. My great friend, Karl Eggerss is here to talk about money news for the week and the big stories concerning your money in the markets and all that. So what are the big stories you’re looking at this week, Karl?
Karl Eggerss: Well, we’re starting a new trading month and April was the best month for the stock market going all the way back to November and remember, that was when the vaccines were first announced that they were about to come out. And so we continue to push higher and a new report came out last week saying that Americans own more stocks per household than they’ve ever owned. And so that’s really what you have right now is this new, in the last year, so this new kind of popularity in the stock market, more people invested in the stock market than ever before and that is a good thing because it certainly shows demand and it helps all of our 401(k)s, but there’s also a lot of speculation and people that are new to the stock market and not really experienced and they’ve never experienced a down market. And that’s my concern is that over time, he knows we experienced some more volatility that some people are probably a little over their skis in terms of what they’re doing. It’s turning into more like a gambling casino than it is long-term investing.
Trey Ware: Well, and the problem with that, as you mentioned, a lot of these are rookies, right? So they haven’t been through a down market. They are going to freak out. They’re going to lose their stuff.
Karl Eggerss: Well, that’s it. And it’s a naivety to think that the market just continues to go up. And again, if you’re diversified, you can handle some of the ups and downs, but if you’re sitting here with 100% of your money in stocks or you’re using leverage, which we see a lot of people do and they’re borrowing money to buy stock, then when it goes down, they have to pay it back or sell the stock and so that’s really the issue. And of course we have cryptocurrencies and a lot of new types of investments and people just don’t have a lot of experience with that and I think most of our listeners though, for the most part, I believe that they are diversified and they are benefiting from the stock market will be appropriate with it.
Trey Ware: Good. Spread love around.
Karl Eggerss: Yeah.
Trey Ware: Before we run out of time, I wanted to mention something else that I see very serious concerns with and that’s inflation. I think inflation is higher than what we’re being told right now. I think it is surging right now and it’s being kept under the radar. I don’t know why, political purposes maybe. I don’t know, but I think it’s a much stronger factor than we see. We’re also beginning to see the shortages because of labor not going back in full force, the economy picking up, but labor is not there to service the economy like it was before. A lot of people are getting the stimulus checks and their unemployment and they’re taking time off and not working at all. So now we’re having shortages in a lot of different areas. It’s not just in one segment that maybe we could make up for elsewhere.
It’s spread throughout the economy. We’re talking about gasoline shortages this summer because we don’t have the trucks. There’s plenty of gasoline, but we don’t have the trucks to get it to the stores, et cetera, et cetera. So when we have all this cash that the Fed has pumping into the market since 08, right? 09 and they’d just been buying and buying and we’re probably on QE 109 by now. So you’ve got that and then you’ve got the government tossing trillions of dollars into there too. So you’ve got a bunch of dollars competing for very few products, that means inflation, right?
Karl Eggerss: Yeah. And the issue is the Federal Reserve. You mentioned it, the Federal Reserve is making a big gamble. They’re saying, “we don’t think this is going to last. We think it’s temporary. So we’re going to keep interest rates low. We’re going to keep the printing presses going.” And that’s a big risk because if inflation continues to get out of control, they’re going to be behind the curve and then guess what they’re going to have to do, Trey? They’re going to have to raise interest rates very aggressively and that would cause a stock market sell off, that would cause interest rates to go up because nobody would be able to refinance. So they’re playing a pretty dangerous poker game right now. We’ll see how it plays out over the next few months, but the employment thing, you’re right, huge problem. I’ve got a friend that’s a CEO of a large restaurant chain.
He said, “It’s very difficult to get workers right now.” That’s his number one concern right now. And we have unemployment checks continuing to go out. We have moratoriums on evictions. So people are saying, “Hey, you know what? I can game the system. If they’re not going to come after me for not paying rent, I don’t have to do it right now, hence, I don’t have to go to work because I’m getting unemployment and I don’t have a rent to pay.”
Trey Ware: Right.
Karl Eggerss: And so that is an issue right now. That’s a structural issue.
Trey Ware: And if they’re not there, we’re talking about, as an example, a major chicken shortage. Now people go, “Well, what’s the big deal about that?” Think about that. I mean, think about how many chicken restaurants there are and chicken in the stores and chicken this and chicken that. Well, they don’t have enough workers to… They got chickens. They got chickens everywhere. There’s not enough workers to go swaddle the chickens and prepare them and get them to market. Well, now you’re going to have enormous price increases on chicken everywhere you go. The next time you stop at Church’s or somewhere like that, you’re going to see prices go up and we’re going to see that throughout the entire… Here’s the point, it’s going to happen throughout the entire economy. There’s not going to be a sector of the economy that’s not going to be affected by these rise in prices. Karl, I got to let you go, we’re out of time, but thank you every Monday for being here. Karl Eggerss, creatingricherlives.com. Coming up, Ware and Rima is next. Trey Ware, KTSA.