for more insight on early morning trading George Young portfolio
manager at Villarreal Yanko joins us now with more,
thank you so much for being here.
We gotta jump right in and ask you, uh, you know, as I just mentioned,
we are set to hear from Fed Chairman Jerome Powell later today.
I know a lot of people are on pins and needles
after their two day Fed policy meeting just wrapped up.
So what are some of the main questions that we'll need to hear from
him and some of the things that he's gonna need to answer for people?
Well,
the main question is obviously inflation that's on the top of everybody's mind.
And the difficulty is that we are in a very unknown environment.
You've obviously got the war in Ukraine.
That's a bit of a problem and that's starting to spread into rising costs,
which translates to inflation for the consumer.
All the consumers have seen what has affected in fuel prices,
So it's very likely that we have a 75 basis point increase and
that's not going to be the only one we've got more coming.
The thing that's tricky here,
is that all that's known you and I are talking about now, your viewers are aware of it.
So that means there is inflation.
So the big question is, is this going to be sufficient?
These moves that the Fed has signaled
to be able to tame inflation.
The big problem is that if they tamp down too hard,
then we could fall into a recession.
We're not out of Covid yet. So there are a lot of questions out there
and it's really hard to strike that balance. You know, they said 0.5%.
Now they're saying 0.75%.
Some experts say they just need to go ahead and nip it in the bud
once and for all and make it 100% that they're gonna take it up.
So 100 basis points. That is, do you think
that that's too far? Do you think that that's a good approach for them?
Because if it's too little,
then it won't have a good impact and they'll keep having to, you know,
tack on these additional basis points.
Well, sort of like ripping off the Band Aid.
Do you wanna do it real quick or do you want to do time?
And I think generally would be better to do it over
time and just see what the reaction is because again,
this is not a permanent situation.
You can make a smaller move today. Make a bigger move at future Fed meetings.
I think that's likely.
What they're going to do is take their time to
do it and see what the effect is because again,
you're trying to steer the car correctly, can steer too far up the road.
You overcompensate.
It's, it's, it's a very tricky situation and, and Powell's on the hot seat here?
I agree. It's definitely a tricky.
And he's on the hot seat, we're waiting to hear from him. So it's,
Do you think the Fed is still moving, uh, too fast.
You know, we a lot of people were like, they didn't like the 50 basis points,
but they felt like it was better than 75 basis points because
some people were saying that alone could set off a recession.
Do you think that's enough to set off a recession or is that a safe point to be at?
I think it's a safe point to be at.
Again,
you've only got so many tools in the toolbox and you've got an electorate that's, um,
you know, we're coming into midterm elections.
So that's something that, you know,
biden is very much aware of and pal is not supposed to be political.
But again, everything gets politicized nowadays,
which makes it pretty difficult for him.
Um, I think the key to this is for investors to be thinking long term,
how that's going to affect them.
What we've seen so far in the first six months this year, stocks have been rocked,
bonds have been rocked.
Cash has really been the only place to go.
The difficulty is that there's there's been no place to hide.
So what that should tell investors that
there are opportunities out there right now.
And I think that's important is that if you're a long term investor,
which you should be investing is not like
going to the casino and coming out immediately.
What can you do the long term.
I like that, not the casino.
All right,
but let's talk about the consumers who some of
them may not be investing in certain things.
And last week's C. P. I. Data in Tuesday's P. P. I.
Data showing that the costs continue to rise across the board.
So do you think inflation has peaked or is it still
too soon to detail and how is that affecting consumers?
Oh well it's terrible for consumers.
It's particularly terrible for those people who aren't fixed income,
but that is a hallmark.
We've not seen inflation too much of a degree in the last
15 years since you've had that huge rise in the bond market.
Well, there's never a permanent situation in which the economy finds itself.
So over time
we do have inflationary tendencies in this country
and we're seeing them and you can describe them two very distinct causes.
Uh you can see there was a shortage of energy, for instance, for a long time,
there wasn't any drilling because the demand wasn't there.
The demands now come back partly owing to the Ukrainian crisis,
partly owing to worldwide demand picking up.
Also, people are traveling a lot more.
So there's huge demand for products and the shortage of supplies,
supply and demand.
Basic economics tells you prices are gonna go up.
So it's a tough place for the consumer,
but for the investor for those who are able to invest.
I think there are opportunities right now and
I think that's what should be focused on.
Well, I know a lot of people want to invest in a home right now,
but they're afraid of these interest rate hikes at what
point will what they decide today affect the consumer,
It's affecting the consumer in the market right now?
Well, I mean as they increase it,
will that increase set in immediately or will it take a few days?
Well, I think we've already begun to see the effects of that.
Um, demand for mortgages is off by about 50% from a year ago.
So that's been a huge drop. Now, houses are still not quite affordable.
So the difficulty is that you see lumber prices dropping,
you see that wage earners aren't able to increase their, their income.
Uh,
they're they're on a fixed salary And that
makes it very difficult for the consumers.
So I fully understand that's going to make it tough for the economy to pull through.
Mm. And now let's talk about Bitcoin.
You mentioned investing earlier, A lot of people are investing in Bitcoin.
Bitcoin. But we continue to see it plunge.
And major crypto companies such as coin base and crypto dot
com cutting staff amid this broader selloff that we're seeing.
So this does this signal that maybe crypto has
seen its best days and it's nearing its end.
Well,
we haven't invested in crypto but there's an old saying and I'm sure your
views heard this playing poker if you don't know who the Patsy is,
you're the Patsy.
So that means if you don't understand the game, stay out of the game,
that's what we've done for a long period of time.
I don't understand crypto,
haven't bought crypto.
I think it's in its own world and I think you have more problems they had for crypto.
He's like, I'm staying away from it.
All right, we're gonna have a crypto expert on later and see if he agrees with you.
But before you go, I want to ask you, you know,
what are you recommending investors look for opportunities in this market?
Well,
I mentioned casino in that analogy purposefully earlier
and that's one of the I think a
great opportunity right now is caESar's I understand
that there's online sports betting right now,
but the value of their land based casinos is worth every penny
and you're getting the online sports betting for free right now.
So it's something that we think can continue to grow.
Caesars has been pummeled. A lot of people want to spend money,
they want to get out of the house post code
and
logical place to go.
All right, well at least we have some options. Alright.
George, thank you so much Joyce yang portfolio manager of Hillary and Co