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.
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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]