Stock Market Stuck In Neutral... Here Is When It Might Break

SPEAKER_1 (0:01)

Welcome to the Money Tree Investing Podcast. Stock market, wealth, personal finance, value stocks. Invest in your life.

Kirk Chisholm (0:11)

Hello, Smart Money Tree Podcast listeners. Welcome to this week's show. My name is Kirk Chisholm. I'll be your host. And today I'm joined with Doug Heagren. Hey Doug.

Douglas Heagren (0:17)

Back again. How you doing, Kirk?

Kirk Chisholm (0:19)

Doing great. Is that money for me?

Douglas Heagren (0:21)

What'd you say?

Kirk Chisholm (0:21)

Is that money for me? It sounds like the beginning of a Pink Floyd song.

Douglas Heagren (0:24)

No, I was wishing it was. It was a, I got a new device this week for coffee. I don't know if anybody here has heard of the Aeropress, but I'm going camping and I'm giving it a try. And this is an attachment that you can use for their grinder with a drill or I can hand crank it, but the thing keeps falling over on me. So if you hear money hitting the floor, you know, maybe it should be gold or silver coins.

Kirk Chisholm (0:45)

Maybe it is. Never know.

Douglas Heagren (0:47)

I let the secret out. It just be over here.

Kirk Chisholm (0:51)

Yeah. Well, it sounds like money to me, Doug. That's I know the sound of money.

Douglas Heagren (0:55)

That's because you're greedy, Kirk.

Kirk Chisholm (0:56)

No, it's because I'm Scott, Doug, and I'm thrifty. I got a good joke for that one. I'm Scrooge McDuck. I come from the same lineage as Scrooge McDuck.

Douglas Heagren (1:05)

Very good.

Kirk Chisholm (1:06)

It's a good lineage.

Douglas Heagren (1:07)

He never wondered where his next paycheck, and it's a good segue for one of my charts today.

Kirk Chisholm (1:11)

Well, we'll get to that in a minute. And I will say before we pivot from Scrooge McDuck, I don't know what it is, but growing up, maybe it's a Gen X thing, but growing up like all the cartoons, there were actually like morals in a lot of these cartoons and there were lessons like GI. Joe, they teach you a lesson at the end. Like there's all these lessons. Nowadays, the cartoons are, I don't know what the lessons are, but it's probably nothing good. But I remember, I think it was called DuckTales. Yeah. And there was this episode where they discuss the kids who were spending and they're like, Oh, I wish there was more money. I want to, he kind of goes in this whole thing about how money works. It was probably the best illustration of how money works. Than anything non-cartoon related. I mean, it was so good. You can find this online and it shows, basically what happened in Weimar, Germany. And what it shows is like people were wheeling around, wheelbarrows full of money to buy a loaf of bread. And the kids are trying to like multiply their money through magic. Anyway, the point was, he was saying, he's like, no, you can't increase the money supply. I'm putting in in adult terms. You can't increase the money supply or everything else will require more money to pay for it. So increasing the money supply does nothing for the economy. It just makes everything else more expensive. And it's like an equilibrium. So you crave more money, prices go up. Everything's the same, right? If you give everybody a million dollars, all of a sudden a loaf of bread is going to cost $100,000. So it doesn't do anybody any good. That's why when I see what Trump said a few weeks ago, that he's going to give everybody five grand if the Republicans win. A, he must be getting desperate if he's doing that. He's not the first president to try to buy off his voters, but for sure, I doubt that's going to happen. And B, even if he did, what's it going to do? It's going to boost the economy a little bit, just like COVID. COVID boosted spending and then prices, I mean, inflation was up, in my opinion, like about 100 percent, even though they said it was 9.3. I think it was more like 100 So great, we got what we deserved. We wanted free money, we got it, and we got exactly what we deserved. Not what we wanted, what we deserve. I know people don't like to hear that, but I think that's more the reality than anything else.

I want to discuss what's happened in the last week and in interest rates and just run through that really quickly.

This week, the Federal Reserve raised rates 25 basis points. That was a surprise to virtually nobody. There was a 90 percent chance, last week we did this, there's 90 percent chance they'd be raising rates 25 base points, and that's exactly what happened. This was the first time, I believe in a long time, that the Fed committee that votes on interest rates was unanimous, it was 12-0.