Is The Market Blindly Ignoring The Threat From China, Russia, North Korea And The Border Crisis?

Benzinga

Scott Shellady, better known as the Cow Guy, talks about his worries for the market and also talks about the issue with product and labor inflation.   #1 Morning Stock Show To Get You Ready For The Stock Market Open, PreMarket Gainers, Earnings This Week, Economic Data & More!  Benzinga PreMarket Prep 8:00AM ET- 9:00AM ET BenzingaTV on YouTube.

Transcript

00:00 Scott, I don't have a feeling you're not gonna be

00:03 talking us off the ledge.

00:04 How you doing today?

00:05 - It's funny how, you know,

00:10 the market has been whistling by the graveyard.

00:12 And I think that there's something else at play here,

00:14 which a lot of folks really aren't taking

00:15 into consideration.

00:17 And the fact of the matter is this,

00:19 China, Russia, North Korea,

00:22 and a lot of our other smaller enemies

00:24 are getting together against us right now.

00:27 And I think that there's gotta be

00:29 a little bit more nervousness in the market because of that.

00:31 We are just ignoring it blindly like we are,

00:35 there are problems on the Southern border,

00:36 and it's going to have an economic consequence.

00:39 I mean, I don't know about you,

00:40 and I don't wanna make this political here,

00:42 but I'll just say one thing.

00:43 I didn't vote to have my tax dollars

00:46 go to house, feed, and clothe 6 million illegal immigrants.

00:51 It's going to have a drag on the economy.

00:54 Yesterday, they're calling it Sunday, Bloody Sunday,

00:56 because we have to turn back on the student loans

00:59 that people should have been paying all the time anyway.

01:02 And then we're faced with the fact

01:03 that we've got these rates that don't look to be going down,

01:05 and arguably it could be going higher.

01:07 We had the PCE on Friday that doesn't look good.

01:09 If you ask me, I mean,

01:10 I love how people say inflation's cooling or going down.

01:13 No, it's just going up at a slower pace.

01:15 You're paying more than you did this time last year.

01:19 And then we've got the specter of Christmas

01:20 coming around the corner.

01:21 And a lot of folks still like to spend

01:22 a lot of money on Halloween.

01:23 So I think budgets are tight.

01:25 All the loan details tell you the fact

01:29 that we've seen foreclosures are starting to spike.

01:32 Car loans, delinquencies are spiking.

01:36 Delinquencies and/or denials

01:39 of new credit cards are spiking.

01:40 I mean, I just want somebody to show me

01:43 one piece of good news so I can sleep well,

01:45 because I can't find it.

01:47 - We're going to find good news for you here,

01:49 but I'm with you.

01:50 And I think the rating is on the wall here,

01:52 but bring it back to product inflation

01:55 and talking about products still going higher.

01:57 You know what the biggest issue for this market is?

01:59 And I think I'm the only one saying it.

02:02 Like it's labor inflation.

02:04 - Yes.

02:05 - Because you are seeing this across the board here now.

02:07 UAL pilots, Friday, get 40% raise.

02:11 UPS, 40% raise.

02:13 GM and Ford and Chrysler workers want a 40% raise.

02:16 They don't want a 4% raise.

02:18 They want a 40% raise.

02:19 What is this going to do to margins?

02:22 If we're going to start jacking up everybody's wage

02:25 by 40% over the course of the next couple of years,

02:28 does that not show up in product inflation as well?

02:30 Because these companies are not going to be able to eat this.

02:33 They're going to have to pass a lot of these costs

02:35 onto consumers.

02:37 Those cars that are $75,000 you're looking at,

02:40 you know, like a pickup coming from Ford

02:44 is going to go up in price more.

02:46 Who's going to be able to afford these trucks

02:48 so they can complain like,

02:49 oh, well, I'm working and I can't afford to buy a new truck

02:52 because you're not giving me a fair wage.

02:54 Well, nobody can afford to buy a new truck.

02:55 And as you know, now you're going to put 40% raise.

02:58 They're going to be $100,000 pickups here.

03:00 - If they're not already.

03:02 I mean, you're exactly right.

03:03 It's the wage price spiral.

03:05 We talked about that when we were all in economics

03:08 way back when.

03:09 But I'll tell you,

03:11 those wage pressures will come through

03:12 at higher prices for the vehicles.

03:14 We're ultimately going to be the ones

03:16 that have to pay the price for that.

03:17 You're exactly right.

03:18 But I'll tell you, just to give everybody

03:20 a 60 seconds of history,

03:22 there is some silver lining at the end of that issue

03:25 because it was 1973,

03:28 and I have a British passport.

03:29 I've spent 16 years living in London,

03:30 trading the markets in Europe.

03:32 So I'm a student of Winston Churchill

03:36 and the English prime ministers.

03:38 In 1973, we had an English prime minister

03:40 by the name of Edward Heath.

03:42 And he was a conservative,

03:43 but he lost control of labor,

03:46 like you're just talking about.

03:47 And the coal miners went on strike at the same time,

03:51 the railroad workers went on strike

03:53 'cause they felt he was weak and took advantage of it

03:56 and basically shut down the country.

03:58 That's when they instituted a three-day work week in 1973.

04:02 Officially, the country was often closed

04:05 on Mondays and Fridays,

04:06 and people only went to work Tuesday, Wednesday, Thursday.

04:09 Obviously, he got kicked out of office.

04:12 A Democrat was elected right away,

04:14 and he was basically shunned from his party.

04:16 But having moved aside because of the decisions

04:19 and all those strikes that he let labor get out of control

04:23 while he was in power,

04:25 that created a vacuum,

04:26 which allowed for a certain person

04:27 by the name of Margaret Thatcher to come in and take over,

04:30 and all was good for the next 10 years after that.

04:32 So there could be something good that comes out of this,

04:35 but I tell you, I feel as though,

04:37 and again, I don't wanna be too hyperbolic,

04:40 but I feel as though they're losing control of the economy.

04:43 They've held a lot of balls in the air,

04:45 but I think that some of these things

04:46 are starting to come to fruition.

04:48 They're dropping a few, and at the same time,

04:50 they're losing control of labor.

04:53 And you've got a problem

04:54 when you don't have control of labor in the economy,

04:57 and I think that there's only one thing

04:58 that's gonna happen.

04:59 We're going to have to have a hard landing,

05:01 and we're definitely going to have a recession.

05:04 But I don't think there's any way

05:06 that we can guide this thing lower

05:07 because of what you just said with the labor

05:09 and what we already said

05:10 about what's been going on in the economy.

05:13 [BLANK_AUDIO]

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