May 15, 2022
Listen to Podcast Episode:
On this podcast, Suze walks us through her forecasts for the rest of the year in regards to: inflation, recession, the stock market, gold, bitcoin and more.
Suze: May 15, 2022
Suze: Suze School. And on today's Suze School
Suze: I really want to try to tell you what I think you should do
Suze: In 2022
Suze: but before I can tell you about what I think you should do.
Suze: I think it's important that we all just take a moment
Speaker 2: and stop
Speaker 2: and look at what is happening as of
Suze: right here and
Speaker 2: right now.
Speaker 2: So for
Suze: those of you that do invest in the stock market,
Suze: The Standard and Poor's 500,
Suze: Which are the 500 largest stocks. That's an index that most of you are in.
Suze: If you have an index fund is down 16.11% so far for the year
Suze: NASDAQ which is where all the technology stocks are.
Suze: The NASDAQ is down 27.15% for the year.
Suze: So I know that a lot of you
Suze: have been feeling the pain of the stock market and many of your stocks going down and down and down.
Suze: And we currently have an inflation rate
Suze: of 8.3% down just a tiny bit
Suze: From 8.5%, which was the highest it hit a while ago in 40 years.
Suze: But that's where we are right now.
Suze: Real estate is still up about 15 - 17%.
Suze: Is at $110 a barrel.
Suze: So prices at the gas station are not going to be going down.
Suze: But what has also happened in the year 2022 so far
Suze: Is it wasn't like the years 2020 and 2021
Suze: where you couldn't go out, you couldn't spend, you were getting all kinds of checks, you were getting stimulus checks, unemployment checks, extra unemployment checks, child tax credit checks, all kind of money was coming your way at the exact same time that you didn't have to go to work, you didn't have to spend money, you didn't have to buy clothes, you didn't have to drive nothing.
Suze: And then 2022 happened
Suze: and everything in essence went back to normal, but even more normal. But here's what's sad
Suze: In those two years, 20 and 21,
Suze: you all got used
Suze: to having a lot of extra money or some extra money depending on your circumstances
Suze: and your credit card debt
Suze: went down
Suze: in America
Suze: and your savings rate went up so high, I can't even tell you.
Suze: But where are we Right now?
Suze: Right now, credit card debt has returned to the highest that it's maybe ever been.
Suze: The savings rate were all the way back
Suze: To where it was in 2013.
Suze: The standard of living today
Suze: Is back to where it was about 2017 through 2019.
Suze: We are moving backwards in terms of healthy
Suze: financial behavior. One of the most disruptive behaviors to me
Suze: is that so many of you now
Suze: are spending so much money
Suze: and you don't have the cash anymore to pay for it. Your credit cards maybe are maxed out, but you still have your real estate that you bought
Suze: and you have a lot of equity in that real estate
Suze: and now people are starting to do cash out refinancing, you're taking cash out of the equity of your home
Suze: and you're refinancing. But what makes no sense about that is you are giving up a mortgage
Suze: that you got maybe a year or so ago at 3.5%
Suze: and you're refinancing now at 5.5%
Suze: that isn't when you refinance,
Suze: so many things like that are starting to really show what's happening in the economy.
Suze: So that's a very quick overview of where we are right now, financially speaking, I mean we have other kinds of things happening, but that's a nice little overview for you.
Suze: So what we need to do then is break down different things
Suze: as to what will happen in the future. Now, let's start with inflation
Suze: because inflation really does affect
Suze: every single one of you listening to this podcast,
Suze: you know, and I know that you're paying more not only at the gas pump,
Suze: but your food bills have absolutely skyrocketed
Suze: if in fact you do want to travel,
Suze: airplane tickets are out of sight right now, hotel rooms are increasing every single thing is going up. Oh, you're buying a home and you want to fix it up.
Suze: Alright, the aluminum
Suze: has almost doubled from a year ago wood even though it's coming down is so expensive, you cannot do anything today
Suze: and not expect to pay maybe
Suze: 50% more or 100% more for something that you would have purchased one year ago.
Suze: So it affects all of you. So the question has to be asked and answered, how long is inflation going to be here?
Suze: And I have to tell you,
Suze: I think it's going to be here until about October
Suze: now. I know a lot of people are saying, oh inflation has peaked its peak.
Suze: No, it hasn't
Suze: because it's very difficult to bring down inflation
Suze: the way that it's being done right now with very small moves in interest rates
Suze: that the Federal Reserve happens to be initiating.
Suze: So I think it's going to take, this is just my opinion. It's going to take a whole lot longer than everybody thinks it's going to take
Suze: and it's going to affect you probably,
Suze: we'll see it at about October when maybe it will have peaked and then things maybe will start to reverse
Suze: now when inflation continues. The way that it is.
Suze: The only way to get inflation under control
Suze: is by raising interest rates with the Feds.
Suze: And I think you're going to see the Feds continue to raise interest rates now
Suze: for at least two more times maybe more.
Suze: If they really wanted to help us, they would just raise it a whole bunch of right now, take the hit and everything would be great.
Suze: But I just don't think that's what they are going to do.
Suze: So with interest rates going up.
Suze: What you need to know is the stock market does not like when interest rates go up. Especially growth stocks, technology stocks, stocks don't like when interest rates go up. I just want you now to think about that
Suze: Now, I know on Friday
Suze: that the market went up very, very nicely
Suze: and I think it is probable for the next week, maybe two weeks these markets can continue up.
Suze: But I think after that you're going to see these markets go right back down.
Suze: There has never, ever, ever been a time when the Feds were tightening that, that was the end of a bear market. It has never happened that way.
Suze: So don't just think because Friday, the market went up, Oh good. Everything's recovering. I can do this again and continue on like normal.
Suze: Like I said,
Suze: my personal opinion
Suze: Is that it may go up this next week or two.
Suze: But after that, I have a feeling that it's going to start to go back down again.
Suze: A stock market reaches its bottom when you have something called capitulation
Suze: and that is when everybody has just given up,
Suze: they are selling and selling and selling and they are not buying like they did Friday,
Suze: they are just selling and that really hasn't happened yet in the stock market
Suze: a little bit ago, I said, please don't do anything until this podcast today.
Suze: And that is because I want to talk about the different types of investors that are out there.
Suze: There's one kind of investor
Suze: That's younger. They have 5, 10 15 20 30 or 40 years until they need the money that they've been putting away in their retirement accounts
Suze: and they've been doing it every single month, little by little on a dollar cost averaging basis.
Suze: If that is you
Suze: and you need to just continue through this market, no matter what it does,
Suze: You need to continue to invest month in and month out. You need to make sure that you are absolutely diversified. You do not want to be 100% in tech, you want to be in index funds in NOBL, you want to be in really good performing stocks oil
Suze: but you want to be diversified dollar cost averaging in.
Suze: I would not be selling here on any level
Suze: if you are in good quality investments
Suze: And you have at least 5, 10, 15 years or longer until you need this money.
Suze: Then there's another type of investor
Suze: which is also young. They have many years till they need this money but they got a lump sum of money.
Suze: Maybe they sold their home and they have $800,000 or they were left in inheritance of $1 million dollars or they have a whole lot of money from something, they sold the business but they have a really large lump sum of money.
Suze: And now those people are writing me and they are asking me should I put it all in the stock market right now?
Suze: If I were you at this point in time and it's very difficult for me to tell all of you what you should be doing because you're all in such really different situations.
Suze: But I would not be committing a large sum of money right here and right now to the stock market. I just wouldn't do it.
Suze: Hey, if you want to start on really down days putting small amounts of money in and dollar cost averaging and just keep doing that over the next year or two. Okay,
Suze: But for lump sum investing, I would not be doing that right now.
Suze: So I ask you to be careful.
Suze: I ask you to understand that there are other alternatives out there right now.
Suze: As you know, I'm absolutely in love with Series I bonds
Suze: and so you should check those out.
Suze: I also really love Treasuries.
Suze: Let me tell you what I have been doing with large sums of cash.
Suze: I have not been putting it into the stock market at this point in time.
Suze: I have been buying six months, one year and two year Treasury notes
Suze: because rather than just it's sitting maybe at a brokerage firm not making any interest at all or you know, smaller interest rates like that. When you have a large sums of money,
Suze: then there's absolutely nothing wrong, especially if you don't need that money for six months or a year or two to simply buy Treasury notes, bills
Suze: Or whatever you want to lock in, sometimes close to 3%. Now when I did it, I was able to get about 3%.
Suze: So they go up, they go down, but you can time when you want to buy them, but I don't know three %
Suze: just for money that's safe until I can figure out what I want to do or invest in.
Suze: Then it's like, okay,
Suze: remember when you own a Treasury Bill Bond or Note, you can also always sell them in the secondary markets.
Suze: So if you want and you buy one and it's really short term,
Suze: you can get out of it, liquidity is there for you and then you can do whatever you want with the money. But you still did relatively okay while you're sitting there.
Suze: Just something to think about.
Suze: Again, for those of you who need money that is liquid, you cannot tie it up, emergency fund, whatever it may be. You should absolutely take advantage of the offer at Alliant Credit Union
Suze: again, check out my alliant dot com because it's still, in my opinion, one of the best deals out there,
Suze: but you just have to be careful about investing right now a large lump sum of money,
Suze: the next type of investor
Suze: out there
Suze: is somebody who is in retirement or very close to retirement
Suze: and for those of you that are in this situation,
Suze: it is a very difficult time for you right now
Suze: and it is difficult because as interest rates go up,
Suze: your bond funds have been going down
Suze: as interest rates go up, stocks don't like it. Your stock portfolio is going down at the exact same time
Suze: that you need to be withdrawing money maybe from your retirement account or you're about to withdraw money from your retirement account.
Suze: I've always said to you that you need a 3-5 year cash cushion
Suze: Where you know, if you need money over the next 3-5 years
Suze: to meet your financial obligations above and beyond your Social Security check or your pension or whatever, you're guaranteed income happens to be
Suze: that, that money needs to be in cash
Suze: for times like this because rather than liquidating some of these stocks
Suze: that probably you should be holding for the long run,
Suze: what you really want to be doing is taking that money from cash.
Suze: So have you done that?
Suze: Because if you haven't done that,
Suze: then it's really difficult now for me to tell you what to do because a lot of this has taken such a hit already. So you would have to just sell everything here now in order to raise cash and that was not the point of this.
Suze: So you're going to have to really look at everything that you have and make decisions, why is that?
Suze: it probably
Suze: Could take 3-5 years
Suze: after these markets are done doing what they need to do
Suze: for you to get back to where you are.
Suze: This is not going to be a situation where all of a sudden it went down and now it's back up and everything is fine again. This is a situation where it could take a long time
Suze: for everything to work itself out.
Suze: I mean you really have to think about what's going on in the world right now and what's going on in the world right now is very different than what was going on years ago or even during the pandemic.
Suze: We were not at war,
Suze: we are at war everybody. And the reason that I say we are at war is we have to finance the war with Ukraine, we have to help them
Suze: and at the same time that's happening, you know, we have all other things that are going on like I said,
Suze: and so it is really important that it may take a while
Suze: to clean up this mess
Suze: because we don't really know what's going to happen.
Suze: So you have to plan for 3 to 5 years in good times. It normally takes a market from the peak to the trough back to the peak again, 3.5 years,
Suze: which is why I've always said to you, you need a three year to five year cash cushion.
Suze: This may be a situation where it could be five years
Suze: now for those of you who have time on your side, it's so fabulous because you're going to continue to dollar cost average every single month into these stocks that are down and even if they start going back up again, they'll be at a lesser price than they would have been
Suze: at the end of last year.
Suze: But for those of you in retirement,
Suze: it's another story.
Suze: So we need to think about that.
Suze: Now. The next thing is
Suze: what happens and I'm going to talk a little bit later a little bit more in detail about bonds and everything like that. But I just want to give you the big picture here
Suze: when interest rates start to go up
Suze: and they have to go up why everybody to combat inflation to get inflation to go down
Suze: when interest rates go up. And I've already said this to you now, the stock market does not like it
Suze: and it affects the stock market, especially growth stocks. Why is that? Because now for these companies to borrow money to grow, it costs them more because interest rates are higher.
Suze: You also have people that are selling out of these stocks because they're afraid
Suze: and rather than staying in the stock market to earn a dividend of maybe two or 3% they're going into treasuries where they're safe and sound,
Suze: that hurts the value of the company as well
Suze: when that starts to happen
Suze: then what you also see companies start to do as you've seen right now with Amazon
Suze: is that they try to cut back their expenses in any way possible
Suze: because they can't continue to pass price increases on to all of you.
Suze: So the next thing that they do is they start to cut back on their own expenses and what do they do to do that? They start laying people off,
Suze: I mentioned Amazon a second ago and that's because Amazon has announced they're going to lay off 100,000 people
Suze: when they lay off people, not just amazon but all these corporations start to lay off people
Suze: then the unemployment rate starts to go up which is exactly what the government wants to see
Suze: because that starts to tame inflation because when unemployment goes up
Suze: you spend less money because you have less money and when you spend less money the economy starts to cool down and inflation starts to come down as well.
Suze: And then what happens after that
Suze: usually is you will also see a recession come about
Suze: Now I personally think we are going to have a recession and I think it could happen anytime between now and the end of 2022
Suze: And definitely into 2023.
Suze: So it's not going to be an easy financial year,
Suze: it may not even be an easy financial two years.
Suze: So what should you do in 2022
Suze: given everything that I just said to you,
Suze: the first thing you have to do right now is you need to start conserving.
Suze: Don't wait until it hits you. Don't wait until maybe you lose a job. Don't wait, don't wait, don't wait.
Suze: You need to start conserving right now. If you have credit card debt, start paying it off, get out of debt,
Suze: stop going out to eat so many times, stop celebrating as if again the money faucet is never going to turn off because I'm telling you, I personally believe it is going to turn off.
Suze: So you have got to start conserving right now
Suze: when interest rates go up,
Suze: credit card interest rates also go up as well as home equity lines of credit go up
Suze: a little bit of a reiteration of what I just said to get out of debt,
Suze: but you, if you have a home equity line of credit, you have got to pay that off right here and right now and figure out how to do it
Suze: because the interest rate in most of those cases, your interest rate is going to go up and up and up. You do not want to be in a home equity line of credit or with a credit card with variable interest rates because those rates are going to go up.
Suze: So that relates to the first thing I told you to start conserving and get out of debt.
Suze: That's a reinforcement of that.
Suze: The third thing you need to do is I need all of you to really look closely at your investments.
Suze: Seriously. You need to know what you have.
Suze: I was talking to somebody the other day that one of the more brilliant women I've ever known in my life
Suze: and I simply said to her, so what's your 401k. Invested in?
Suze: And she said, I don't know,
Suze: I haven't looked at it.
Suze: I haven't thought about it.
Suze: You cannot have that answer.
Suze: You need to look at where you are invested. Are you in bond funds? Are you in individual bonds? Are you in growth stocks, technology stocks, stocks that pay a dividend,
Suze: mutual funds or exchange traded funds that pay a dividend because you need to make sure that you have a solid foundation with your money and what you continue to invest in.
Suze: So those are the three things that I need you to do
Suze: Just, I'm going to break down now individual categories for you.
Suze: Real estate,
Suze: I think real estate is going to do just fine.
Suze: Do I think it's going to go up 17% a year or whatever that is? No,
Suze: But I do think it will continue to go up 5%. Real estate usually does pretty well during a recession.
Suze: Got that everybody mortgages
Suze: do. I think mortgages will continue up. Oh you betcha I do
Suze: without a shadow of a doubt. Also I mentioned it earlier. Do not refinance your house to take cash out if you have a low interest rate mortgage
Suze: and you're going to refinance to a high interest rate mortgage. You are asking for trouble
Suze: Stock market. I briefly told you what I thought, but I do think it's going to continue down
Suze: and it will continue down until it is ready to turn around.
Suze: But again, I think it could bounce
Suze: These next two weeks
Suze: and then start down again. I will reiterate once again, if you are investing, can you invest in dividend paying stocks? Can you invest in stocks that are in industries that are favored? And right now oil is still favored
Suze: and I'll talk about that in a second, but just make sure that you are not in highly, highly speculative companies. Now
Suze: with that said,
Suze: there are two companies that I've talked about in the past
Suze: that I myself was investing in
Suze: and believed in tremendously
Suze: and that was ARKK Innovation Fund as well. As
Suze: Upstart was blown out of the water. It's now down at about $37 a share all the way down.
Suze: If you own it, I would not be selling it right here. Let's just see what happens. And if the CEO can explain a few of the things that went on and let's see what happens with the company.
Suze: I'll let you know if you should get out of it.
Suze: As far as ARKK goes long, long term investment. We'll see if Cathy can pull it out or not. But those were never recommendations that you should put a lot of money in.
Suze: Those are recommendations where you just put a little amount of money in and you see what happens. Am I shocked about upstart? I'm shocked along with, I can't even tell you how many other people it was one of the Motley Fool's most favorite picks and everyone
Suze: almost of their newsletters that they put out.
Suze: So everybody is in shock right now. But let's see what happens
Suze: right now. It doesn't pay to sell at these prices. Okay.
Suze: Next interest rates.
Suze: I do think interest rates will continue up. I told you that
Suze: and they will continue up probably until October
Suze: Let's talk about bond funds
Suze: and individual bonds
Suze: a long time ago now, I told all of you that if you were in long term bond funds
Suze: and in some cases intermediate bond funds, if the intermediate maturity was long, like 10 years or so,
Suze: you should get out
Suze: and here we are now months later. And many of those funds have absolutely gone down
Suze: 10% 12%. They've gone down
Suze: if you haven't gotten out yet.
Suze: Just stay right there at this point in time.
Suze: Will they go down again. They may
Suze: but believe it or not, bond prices are strengthening a little bit here. We'll see what happens. But bond funds,
Suze: have never been my favorite investment on any level.
Suze: I have always preferred individual bonds.
Suze: And most financial advisers say Suze, most people don't have enough money to get a variety of bonds they need. All types of diversification. Oh, give me a break.
Suze: If you invest in Treasuries, I don't care if you put 100% of your money in one treasury, it's guaranteed by the authority of the United States government. I don't care about diversification.
Suze: I remember all the way back in 1980
Suze: '81 when
Suze: Mutual funds had first kind of come about at least at Merrill Lynch. And everybody was selling bond funds and they were all being paid a 5% commission
Suze: To the broker who sold one. So if somebody put $100,000 into a bond fund,
Suze: They would get a $5,000 commission.
Suze: Suze was putting people's money into 30 year Treasury bonds
Suze: Locking in 14.5% of an interest rate.
Suze: and I made a commission of $25. Whether it was,
Suze: You know, $100,000, a million dollars, it could have been $50 million and I would have earned a Comission of $25,.
Suze: I'll never forget all the brokers making fun of me going, what is wrong with you, Suze?
Suze: Well, as time went on
Suze: and interest rates that were really high back then because inflation was really high back then
Suze: started to come down.
Suze: And what was interesting is that the Treasury bonds that I purchased
Suze: Were still paying the clients 14%.
Suze: But as his interest rates went from 14 to 12 to 10 to 7, their bonds doubled in value.
Suze: So if they wanted to they could have sold those bonds
Suze: And reinvested and had twice as much money. Although they would have had paid taxes on it and gotten 7%, which would have given them the exact same interest as half the money at 14%.
Suze: The people who had purchased the bond funds,
Suze: their interest rate did not stay
Suze: because as interest rates went down,
Suze: this is a lesson for all of you. As interest rates went down,
Suze: new money would go into that fund,
Suze: people would invest in it.
Suze: They would have to buy bonds
Suze: at the current interest rate which was lower
Suze: then a few years before. Which brought down the overall interest rate of everybody who was in that bond fund.
Suze: And as interest rates went down, the value of the bond fund did not go up as much
Suze: as the value of my individual Treasury bonds that I was selling my clients.
Suze: So I don't like bond funds just know it. Everybody.
Suze: I love individual bonds.
Suze: An individual bond has a maturity date and a fixed interest rate.
Suze: A bond fund does not have a maturity date and it does not have a fixed interest rate.
Suze: There will come a time
Suze: somewhere here,
Suze: Maybe in October maybe in November, where I will tell you now is the time to buy 30 year bonds
Suze: and 20 year bonds
Suze: long term bonds so that you can lock in the high interest rates as interest rates have gone up
Suze: and as interest rates do go back down again the value of your bond will increase.
Suze: So there will come a time
Suze: when I tell you to do that as an investment.
Suze: But again right now and I mentioned it earlier, if you're just looking for a place to put some money for a short period of time, like a year or two and then you want it and you don't want to risk it, can you just look into Treasury notes
Suze: I really like gold here
Suze: But I wouldn't be buying it right now. It's at about $1810 an ounce. I think it absolutely could go lower
Suze: when it goes lower. Maybe that will be the time to buy. We'll have to see
Suze: because it very easily
Suze: could run up again.
Suze: But let's see. But it has been a pretty good inflation hedge
Suze: unlike Bitcoin,
Suze: that was a horrific inflation hedge,
Suze: it did not work at all the way we thought it was going to work
Suze: now. Many of you wrote me and you said Suze,
Suze: Should we buy Bitcoin? And this was when it was at like 32,000 just a little bit ago. It's almost at 30,000 again today and I said well I don't think so
Suze: the support level
Suze: for Bitcoin meaning it goes down and if it hits that level it should bounce right back up again is $27,200 a Bitcoin.
Suze: So just know that
Suze: Bitcoin, there's no way to know what Bitcoin is going to do or not do, but please remember everybody you did not buy Bitcoin
Suze: so that it would just go up a little bit or you would double your money. Bitcoin is an investment whose time will come
Suze: and years from now, let's see what happens to it.
Suze: So if you want to start little by little here, okay, but I still think it could possibly go a little bit lower and then go all over the place just so you know, it seems like it is following the NASDAQ
Suze: which is where technology stocks happen to be
Suze: on the topic of Bitcoin. I just want to say Ethereum is starting to prove very, very interesting in how they are changing their model and what's to come of it.
Suze: it may be in a period of time here,
Suze: Ethereum maybe something we want to consider here sooner than later.
Suze: As I said earlier, oil is at $110 right now
Suze: very easily could go to 1 13, 1 17, you know that I have been a fan of oil, I don't understand why in the world, oil would go down as soon as China opens up again, there will be more of a demand for oil, depending what happens with Ukraine and things like that.
Suze: I just don't see oil going down that much. So I still like the stocks that I mentioned to all of you, I still like Chevron,
Suze: I still like XLE
Suze: I still like Devon I like Pioneer, I like Kotara for natural gas, I like that a lot.
Suze: And I do think it's important though that you don't over expose yourself to oil, but you watch it also very carefully
Suze: overall, summarizing everything that I just said to you, I think we're going to still have a rough year.
Suze: But I think if you conserve if you're invested in the right place with time on your side, if you're getting dividends while these markets are going down, if you aren't speculating here and going for the fast buck
Suze: and you are just consistent
Suze: with bonds and with gold and with Bitcoin and with your real estate and your mortgages and your credit cards and everything like that and you keep everything that I said in mind,
Suze: I think you'll be okay. But one way or the other, you now know what to do in 2022.
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