Stocks aren’t the only thing going up. Many commodities, including the ones we all use on a daily basis, are rising. Karl visited with Trey Ware about the bet that the Federal Reserve is making.
Trey Ware: … To voter ID and what they’re planning on doing. Meanwhile, we go to Karl Eggerss from creatingricherlives.com. We want to talk about the markets and the economy and where it’s all headed. What’s the big news going on today, Karl? What’s happening?
Karl Eggerss: Well, the Chairman of the Fed, Jay Powell, has been kind of making the rounds last week, and he was on 60 Minutes last night and he continues to say this inflation scare that we’re seeing is just temporary. And so, we talk about lumber prices and gas prices and all that, and he’s making a bet saying, “It’s temporary. It’s going to pause and, because of that, we’re not going to be real aggressive raising interest rates.” And while that sounds good and the stock market likes it and our 401(k)s like that, they keep going up. The bad part is, can it get out of control? And we’ve seen in the past decades that inflation can get out of control to where it starts creeping up higher and higher. And some people would say, “Well, at some level it has to stop itself. Things get too expensive and people just stop buying.”
But when you give people stimulus checks, as we have, what you see is they’re going out and spending that and it’s adding fuel to the fire. And so, now what we’re going to be left with, likely, is higher taxes in the next couple of years, and that will likely slow things down at the same time that we have higher prices. That’s going to be real interesting to watch. The Federal Reserve is really walking a tight rope and people and their 401(k)s need to watch what they’re investing in right now. And again, the stock market is still the place to be. I want to be clear about that. However, we have to watch what we own over the next coming months, because there’s going to be a lot of changes, whether it’s rising rates or whether it is going to be increasing taxes or a little of both.
Trey Ware: Well, I may be dreaming but I see inflation everywhere when a sheet of plywood is now costing you a hundred bucks a sheet, when homes in our area are selling for a hundred grand over the asking price.
Karl Eggerss: That’s right.
Trey Ware: And when the steaks that I bought the other day at Costco are as expensive as anything I’ve ever paid for a hunk of meat, inflation is a real deal. At the same time, they, the Fed and the government, have been pumping cash out there like there’s a ton of cash out there. Unbelievable.
Karl Eggerss: Well, that’s it. That’s it. And so, as long as that continues, then people can afford to go pay these prices. But at some level, Trey, and we saw an extreme example in the late ’70s but, at some level, people go, “You know what? I’m just not going to go buy that meat. I’m not going to go buy that home.” And then, you start to see the slow down and it’s like a pendulum swinging, and I feel like we’re on one end of it right now. And maybe we’re not in the ninth inning, but we’re certainly close to a point where people say, “You know what? Things are getting a little too expensive. I’m going to hunker down my spending.”
And then, as I’ve said for months and months, if not years on this show, the consumers, our listeners driving around, are almost 70% of economy. Whatever they spend, that is the economy. If they slow down spending, that’s when the economy slows down. And everything’s great right now and everybody loves it but, again, like you said, you’re noticing it and it’s not just you dreaming. This is all over the place.
Trey Ware: Yeah, yeah.
Karl Eggerss: Absolutely.
Trey Ware: All right, Karl. Thank you very much. I hope you have a great week. That’s Karl Eggerss from creatingricherlives.com. That’s creatingricherlives.com. We’re going to create something the…