Podcast Episode - Suze School: Everything I Learned (Last Week)


About Suze, Debt


May 14, 2023

Listen to Podcast Episode:

Suze starts off this episode with a brief update on what could happen with the debt ceiling and then shares everything she learned from the economic seminars she recently attended.


Podcast Transcript:

00:00:00

Music: Music (In).

00:00:28

Suze: May 14th, 2023. Welcome everybody to the Women and Money Podcast as well as everybody smart enough to listen, Suze O here. Wishing every single mother a very, very happy mother's day, especially my two nieces, Alexis Tandy

00:00:50

Suze: and Katie Stender Nely, who are two of the most extraordinary mothers I've ever met in my life. Mothers play a very, very big role in every one of our lives, even if we don't know who our mothers are. They were there at one point in time.

00:01:12

Suze: So our love and our respect

00:01:16

Suze: and everything we can do today to make today a very, very special day for every mother out there.

00:01:26

Suze: Also, I just have to wish my good friend Karen happy birthday today. Kay. Just know I love you very, very much. OK,

00:01:37

Suze: Suze School. Now, there are so many things that I did learn over the past 10 days or so that I was listening to some of the most extraordinary speakers of all.

00:01:53

Suze: But before I get into that, there seems to be

00:01:58

Suze: a big elephant in the room. Is that what you call it, something like that? And it's about the debt ceiling.

00:02:06

Suze: Are we going to raise it? Are we not? What is going to happen here? Well, I have to say,

00:02:14

Suze: I'm just so seriously disappointed.

00:02:17

Suze: I'm disappointed because I really believed that by June 1st, which is really only two weeks away that we would have settled this by now or at least come close.

00:02:32

Suze: But as close as I thought we might have been a month ago or two months ago, we are so further away. It's not even funny.

00:02:44

Suze: And that is a very serious thing.

00:02:49

Suze: And one of the reasons if you happen to look at the interest rates of T bills right now, you will have seen the four week T bill absolutely shoot up

00:03:04

Suze: about 5.6, 5.8% interest. Up almost 2% from just a little bit ago is because many, many

00:03:15

Suze: money market funds that invest in treasuries are getting rid of their short term treasury bills that happen to mature in the month of June because they don't want to have anything to do with it. They're going out to August September, they're going far away from June, so they're just selling them to put that money elsewhere. There's a lot of you who don't want your money to mature in June.

00:03:45

Suze: Why? Because you're afraid that if something goes wrong in the month of June, they're not gonna pay you. And it's scary. You know, it's funny is that over this past year or so,

00:03:59

Suze: I've been asking all of you at least to look into the certificates of deposit at Alliant Credit Union.

00:04:07

Suze: And what's fascinating is that nobody who purchased a certificate of deposit at Alliant Credit Union, by the way, you can now get 5% for a one year, 5.15% for

00:04:23

Suze: in 18 months. Fabulous interest rates. If you compare them to what's happening to treasuries right now. Not one of you have written me and said, is my money safe? Am I gonna be ok? But yet thousands of you

00:04:40

Suze: have been writing me saying I'm scared about treasury bills. I don't know what's gonna happen. What do you think I should do?

00:04:48

Suze: So

00:04:50

Suze: you might want to think about transferring if you want to, if your money is maturing to a certificate of deposit at Alliant Credit union, go to my alliant dot com slash ultimate. And that's where you open up an account to get the CDs because certificates of deposits

00:05:10

Suze: are absolutely safe and sound. Especially if you're under the N C U A or in a bank, the FDIC limits up to 250,000 or more if you know how to get more insurance, which I've done podcasts before in the past.

00:05:27

Suze: Do you remember me saying to you that the goal of money is to be secure? If you are not secure in treasuries for whatever reason, look into, especially the Alliant Credit Union certificates of deposits, especially the one year and the 18 months because that's where I think you might want to go. So, what do I think is going to happen with the debt ceiling?

00:05:57

Suze: Well,

00:05:59

Suze: I don't know.

00:06:00

Suze: I really don't know because I still find it such a hard thing to believe that they're going to let us go into default. But I do think that there is something that we might see President Biden doing. So as all of, you know,

00:06:20

Suze: the debt ceiling, we have been told that if we don't raise it by June 1st, that it's very possible at that point that the US will not be able to pay principal and interest on treasury securities and therefore they are in technical default. There will be other things like Social Security and so forth, they won't pay, but it is very possible they will not pay the interest

00:06:48

Suze: on

00:06:50

Suze: treasuries. Now, what's fascinating about that is that they probably would have enough money to do so since we only really owe approximately $60 billion a month of interest on all the treasuries. But let's just say technically

00:07:10

Suze: that they won't be able to pay the interest on treasury securities and therefore they are in technical default. Pay attention here

00:07:22

Suze: because you heard President Biden mention this the other day. Around the time of the Civil War,

00:07:32

Suze: there was the 14th amendment that was passed and that amendment said that the validity of the US debt shall not be questioned.

00:07:46

Suze: All right. So because we lent the government money, they issued us treasury bill bonds or notes to pay us a specific interest rate for that loan.

00:08:00

Suze: What that amendment says is that the validity of that debt because it is the debt of the United States of America should not be questioned.

00:08:13

Suze: Now, for those of you who may be wondering

00:08:18

Suze: that, what was the reason that they put the 14th amendment in there? It happened when they were reintroducing all of the Southern and the old former confederate senators and congressmen back into the US. And because their economy was in such shambles, they were afraid that they were going to have to pay back the confederate war debt

00:08:46

Suze: even if they had to default on the Union war debts. So they put that into the 14th amendment that they can't do that. So now here we are in 2023.

00:09:01

Suze: So some are saying

00:09:05

Suze: since it says that the validity of the US debt can't be questioned. That means that the president can ignore the debt ceiling. Are you following me here? And he could just start raising the debt.

00:09:20

Suze: Now, the problem comes with, let's say he does that

00:09:27

Suze: and he does that on June 1st and he tells Janet Yellen you can ignore the debt ceiling because I'm evoking the 14th amendment. So go out and issue some more bonds.

00:09:41

Suze: I'm telling you everybody, this is a real possibility that this could happen. So, ok, he does that and she listens to him and she issues more bonds and they pay their debts that they owe after June 1st. What's gonna happen after that?

00:10:02

Suze: It is probable that the Supreme Court is gonna come in just a few days later or maybe some weeks later and say, no, you can't do that. That's unconstitutional. You weren't allowed to do that. But here's the problem, everybody, what happens to all those bonds they issued after June 1st,

00:10:26

Suze: if the Supreme Court says that it is possible that they could be considered invalid, that they never should have been issued in the first place. So the question then becomes, do they give the money back and do they just say sorry? Yeah. What are they gonna do? And what are they gonna do if the government has spent the money? They don't have it and they can't issue new debt.

00:10:53

Suze: Well, I'm just telling you, it could create such an enormous mess.

00:11:00

Suze: I mean, I don't even know what would happen if they did that

00:11:05

Suze: if we can't get the Congress to simply pass a law that raises the debt ceiling

00:11:14

Suze: and the president signs it and then this is all over with and if we can't do that and it's starting to look like we're not going to.

00:11:24

Suze: I'm not exactly sure what's gonna happen, but you do not, I'm just saying to you just in case the president evokes the 14th amendment and they issue bonds during that time. I don't care what interest rates they are at, do not touch them with a 10 ft pole.

00:11:46

Suze: So, in the meantime, however, if you do have treasury bills that are maturing later on or whatever or before June, in my opinion, I think you will be absolutely OK. It's just that month of June. That's kind of like, really,

00:12:05

Suze: I don't know, I don't like when I see something jump up 2% approximately almost overnight

00:12:13

Suze: Before I even go into Suze School. I know when I was talking to KT about it last Thursday, KT said, I don't know, Suze, it might be over their head. And then a lot of you on the Women and Money community app got insulted by that. A lot of you've said, I'm tired of people telling me that it might be over my head.

00:12:40

Suze: Well, one of the reasons that my little precious KT said that is she listened to a few of the talks that trust me would be over your head in most cases because it was definitely over mine.

00:12:59

Suze: There was some technical analysis and all kinds of courses that were like, what was that? What do you do with that information? So please don't be insulted it's just because the classes that she chose to listen to with me really were seriously advanced and a few of them really were

00:13:24

Suze: a challenge even for me to get, I had to relisten to it and relisten to it and relisten to it. And why is that? Because at that moment in time it was above my head and I don't mind thinking or knowing that there are things that I don't know and maybe

00:13:46

Suze: would not be easy for me to understand. So please don't take offense to what KT s aid because a lot of it really was difficult. However, every single one of you has the capability with some education listening to it over and over again to absolutely understand it. Do you have a situation in your life where you would be able to apply it?

00:14:15

Suze: That's a whole another story. But you do have it. It's do you want to and do you need to? So I chose to just kind of touch on the topics that I think you would want to know about

00:14:30

Suze: and that's what I'm going to tell you about.

00:14:34

Suze: Now, one thing I took away from these days is that nobody knows for sure.

00:14:41

Suze: There are many brilliant minds that totally disagreed with each other, but really in consensus, the majority of people really did think that we were currently in a recession.

00:14:59

Suze: And if we're not in a recession yet, we're going to be one in one within this year or within the next few months. Just that simple. And therefore it's just something that we should think about.

00:15:16

Suze: My favorite man, Felix Zulauf thinks that we should be in a recession by September, maybe a little bit before that or a little bit after that. But that's when we should be in a recession. Many people also felt that way

00:15:36

Suze: because they were looking at certain indicators that were forward looking indicators, not backward looking indicators. So indicators that didn't tell them what money you did spend all of those things in the past,

00:15:56

Suze: they were looking at indicators and those are called leading economic indicators, what they think is to come.

00:16:05

Suze: And one of them, in particular, David Rosenberg, they call him Rosie. He was just brilliant mentioned an indicator from the University of Michigan that has had a survey that goes back over six decades and it talks about the spending intentions that all of you have. So in other words,

00:16:32

Suze: how much money do you think you are going to spend in the future?

00:16:39

Suze: And what he noted there is that the data that came in

00:16:46

Suze: was worse than it has been all the way back to 1982 again when we had that serious recession.

00:16:58

Suze: So when that happens and buying intentions for the next year have collapsed,

00:17:07

Suze: not just to normal recession levels, but to the worst levels they've had, like I said, since

00:17:14

Suze: that year and a half recession they had in 1982.

00:17:19

Suze: That's what could affect autos and housing.

00:17:24

Suze: Let's talk about automobiles, just for a second.

00:17:28

Suze: Many people talked about auto inventories have totally come back and there is no supply issue anymore. So you could go into any showroom and find now the car that you want.

00:17:47

Suze: However, automobiles though are going nowhere, not because anymore of supply costs, but because of financing costs. So he said, what was interesting is that six months ago, if you had been asked, are you gonna buy a car? You would say no, because of inflation, inflation is too high.

00:18:15

Suze: Now, if you're asked that question, you say no, I'm not going to buy a car. Why? Because interest rates are too high.

00:18:25

Suze: When you combine that with the fact that banks are not willing to lend to consumers, like they were quite a few months ago,

00:18:38

Suze: then we have problems and we have problems because banks don't want to lend money to anybody right now. They wanna hold on to their money. So when you go to get a loan for a car rather than it being at a 3% or a 0% or whatever interest rate, it very well now could be at 11

00:19:02

Suze: 15 17% even 20% depending on your FICO score. So then you look at that and you go, nope, I'm not going to be buying a car. So it is very probable that car prices could come down more

00:19:21

Suze: and many people absolutely projected that sooner than later, many car dealerships will be closing.

00:19:30

Suze: Also, they all talked about how everybody, when they're on television, all these pundits, quote, the economy is good. We're not in trouble because credit card defaults are almost nil.

00:19:49

Suze: So why are we worried about recession? The economy is strong, the consumer is strong, they are paying their bills on time.

00:20:00

Suze: What they also talked about was that when you look at credit cards,

00:20:07

Suze: you don't look at those that are in default.

00:20:11

Suze: What you do is you look at how many people are 30 days late in their payments. You don't wait till they're 90 day late or in delinquency. You look at how many are 30 days late or more and what they're finding is that more and more people are starting to be 30 days late

00:20:40

Suze: across every type of credit.

00:20:44

Suze: So therefore banks and people who lend are saying, you know what I don't like this and they are tightening credit for that reason as well as many, many other reasons.

00:20:59

Suze: Let's go a little bit into real estate.

00:21:04

Suze: It's very important with real estate and many people talked about real estate is that you cannot generalize more about real estate. You can't just say real estate's going up because you have to differentiate it now by location and by type of real estate

00:21:27

Suze: because you have a migration in the United States from people in the north moving to the south.

00:21:37

Suze: So real estate is relatively safe. It may be a problem in some northern states because of migration from north to south. But yet most people agreed that single family homes or condos were no problem yet on any single level.

00:21:59

Suze: And in fact, Barry Habib who is a real estate genius was talking about that in many, many times, real estate has actually gone up during a recession rather than down. He also talked about how the inventory is very, very slim.

00:22:23

Suze: And even though it seems like we have a lot of inventory, we do not. He did talk about how you should not be afraid because many of you are saying Suze, do you remember what happened to real estate in 2007 and 2008? You told all of us to get out of real estate? What should we do right now?

00:22:47

Suze: So, Barry gave a fabulous statistic that I think you should think about, which is in 2007,

00:22:56

Suze: there were four million homes in inventory today. There are only 980,000 homes in inventory

00:23:07

Suze: of which 43% approximately are under contract which leaves only 560,000 active listings. However,

00:23:20

Suze: since 2007, everybody, our population has increased by 30 million people since then that wanna buy homes. So 30 million more people are fighting for three million fewer homes than what they had back. In 2007.

00:23:49

Suze: Also, you just need to know that today, the average person has approximately 58% equity in their homes. Back in 2007, 2008, nobody had equity in their homes because everybody was buying no money down interest, only

00:24:14

Suze: mortgages. So nobody had equity in their home. So it's a very, very different situation. So again, most people agreed that real estate is relatively safe.

00:24:31

Suze: Again, it could become a little bit of a problem in some northern states. But overall single family homes and condos are no problem at this point in time.

00:24:45

Suze: What Barry also said about mortgage rates is that they will come down, but he doesn't see them coming down to 3% 4% down there anymore. He thinks they will come down and stabilize at about 5%.

00:25:06

Suze: Now, why does that matter? A lot of you are finding that a lot of people who own a home right now and they own a home with, let's just say a mortgage of 2.5 or 3%

00:25:23

Suze: they don't want to sell their home because they don't want to move to another home where they're going to have a 6.5 or 7% interest rate. However, he made such a brilliant point.

00:25:39

Suze: A lot of these people also are finding themselves in situations where they now have car loan debt at 11% or more. They have credit card debt, possibly at 20% or more. They have home equity lines of credit, even though their original mortgage is at 3% they may have taken out a home equity line of credit that's now at 9% or more.

00:26:09

Suze: So they may start to understand, especially at a five or 5.5% interest rate for a mortgage. It might be better for them to sell, buy another place, wrap all of their debt into that mortgage because they have so much equity in their home right now and maybe they're downsizing. So wrap all of their credit debt into

00:26:38

Suze: a new mortgage on a new downsized home and then they're not afraid to move. And the truth of the matter is because it's possible that it may be tax deductible in many situations that they would be far better off doing that. And he believes that once people start to understand that

00:27:00

Suze: that will be another reason why real estate will start to loosen up and more people will start to buy and sell and real estate should be ok.

00:27:13

Suze: Everybody absolutely had a concern about commercial real estate for many, many reasons, but the biggest reason being the credit crunch, not only are banks and lenders not wanting to lend to anybody anymore without a good interest rate there really, regardless of your FICO score. If you want to know the truth,

00:27:38

Suze: they aren't wanting to take a risk. So there are people who told stories about, there was a huge developer in Florida. He had totally gotten pre financing for this big, huge complex that he was building at a good interest rate, he was going for it. And the bank called the loan because they didn't want to loan the money, they had the ability to do it

00:28:07

Suze: and he now can't find any other lender that will take that. Or if somebody is out there with a big project and they had financing and possibly they took longer to complete the project than when that financing was due. And now they need more money to just finish it. The banks aren't willing to lend on it. So commercial real estate

 

00:28:36

Suze: may be in trouble for a while. So for those of you who are thinking about being a com a commercial real estate realtor, well, key now just think about that. Next

00:28:51

Suze: many, many people felt like the past, we will never revisit that it's gone that we may find that the new normal is a three or 4% inflation rate. And there were a few people that argued how a three or 4% inflation rate is actually good for the economy,

00:29:17

Suze: but they doubt highly that the inflation rate is ever going to go back to the 2%. They think it will stay at the three or 4% and what eventually will make the feds stop raising even though they are dead set on not doing anything but raising until inflation goes down to 2% is how the slowdown of the economy and the stock market

00:29:47

Suze: will affect them. And they will stop. At that point in time, most people believe that the interest rate that they just raised, the Feds just raised just a week or so ago will be the last one. There are a few people that believe no way he will absolutely continue to raise in June.

00:30:10

Suze: Only time will tell. But they really believe if he raises, he will. Meaning J Powell, the fed chair, he will be making the biggest mistake out there in terms of the overall markets. Almost everybody who is in agreement

00:30:31

Suze: that they think the stocks could very well go up a little bit here. But then they are absolutely going to decline and go down lower than they were in the October lows. And then they will probably in 24 25 turn around and go back up higher than they have been. So they're expecting higher highs in 2024 2025.

00:31:01

Suze: But they are expecting a serious problem

00:31:06

Suze: in 2026 2027 where it is possible that the markets could go down over 50% at that point in time. So we'll just have to watch it and see what happens. They do think that the dollar

00:31:26

Suze: will decline from its September high. But after it does that when the equity markets start to decline, then they think that the dollar will go up to again about one oh eight or 1 10.

00:31:42

Suze: Many of the people still suggested

00:31:45

Suze: that if you are going to be in the stock market, that you really look to companies that are defensive in nature because of where things could go. And also companies that provide daily necessities to the people where you have to eat, you have to shower daily necessities. Let's talk a second about alternative energy

00:32:11

Suze: because a lot of people think that alternative energy is absolutely going to replace oil and therefore oil is done. There were two people on a panel that were maybe two of the most brilliant speakers I've ever heard in terms of their company and what they are doing

00:32:34

Suze: and they are making alternative energy one, they're not public. So it doesn't make any sense to talk about them yet in terms of their name. But one of them is making batteries for cars that are really the size of maybe your cell phone. So these big batteries are being replaced by these little batteries, but they're made with lithium and something else. I forget what it was to tell you the truth

00:33:03

Suze: that those two items that they're made with are recyclable. So eventually we will get to the point where we don't have to keep looking for energy. It's just recyclable, the materials that we use to make the batteries. However,

00:33:23

Suze: they said that it is an illusion that by 2050 or 2030 whatever the dates are that different people are throwing out there, that we will be CO2 free. It's impossible. And the reason is that 80% of all the energy that we are using comes from fossil fuels.

00:33:51

Suze: So one day we will get there but not for many, many, many years. And because of that belief and the cutback on doing anything with fossil fuels,

00:34:07

Suze: and there will be a shortage in the next few years because we have banished the production of fossil fuels. So when that starts to happen, then the oil companies will want to start to rebuild their investments.

00:34:26

Suze: And even though they went to alternative energy, which many of them are doing right now, by the way, they're going to go back to fossil fuels and then what will happen when they do that once the world economy stabilizes because again, they think it's going to be rocky here.

00:34:46

Suze: What we're going to find that later on in '24 to '26. So 2024 to 2026 it's not that far away. Everybody. This is when many of them felt that oil could easily jump to 150 to $200 a barrel.

00:35:08

Suze: And if that happens, then any company listen closely producing oil in a safe place for the western world would be perfect to invest in. Just be careful that it is United States friendly. All right. So just think about that. Um they do expect to see energy go down to $50

00:35:36

Suze: right now a barrel and that's why you're seeing, by the way, Devin and P X D and Chevron and many other companies go down.

00:35:46

Suze: But remember we have said you don't buy those companies for growth, you buy them for the dividends And even though the dividend may be coming down a little bit, 8,9, 10% is still not a bad dividend, even 11%. But again, it is projected

00:36:04

Suze: that very, possibly in one or two years, you could easily see oil at 150 to $200 a barrel. I don't know if that will be true or not, but that's what I have been thinking this entire time as well. So there you go again. Gold, which I found very fascinating,

00:36:28

Suze: right? They think gold will go up for the next two or three months from here and then it will have a correction and go down to about 1850

00:36:41

Suze: which will be a fantastic opportunity to load up because then they see gold going to a new historic high late this year, believe it or not, or next to $2500 or more. And they really like gold mining stocks as an attractive alternative as well.

00:37:03

Suze: So again, you know, one of my favorite gold stocks was Barrick symbol G O L D pays a nice dividend and you know, I'm into dividends right now. So something that you might consider

00:37:19

Suze: again, they did talk about bonds. And what was interesting is that this is one thing that many people disagreed on.

 

00:37:28

Suze: However, the consensus is that next year, you will see equities rise and bonds bouncing back a little.

00:37:39

Suze: And then from the second half of '24 onward, you're going to see bond yields begin to rise again.

00:37:49

Suze: Equities will continue to rise and will go from growth stocks to value cyclicals and things like that. And so again, in '24, '25 we should be relatively ok with everything

00:38:05

Suze: and it's more in '26, '27 where things can get wacky on us, although I think they've been wacky right now.

00:38:15

Suze: So overall, what do you do with all of this information?

00:38:20

Suze: Truthfully we do what we've been doing. So even though I learned many, many things to apply for the future and technically what to look at things and the overall viewpoints of everybody to just sum it up for you. And I know we're going long, but it's ok. You can take it because it's not over your head. Over all.

00:38:47

Suze: You may see the markets go down this year. It might be a good time for your dollar cost average into it. Then you should see the markets go up for next year into '25 as well. And they think they're gonna go up very, very high.

00:39:06

Suze: Real estate is relatively just fine. Interest rates on mortgages are going to go to about 5%. Gold is a good investment. According to them again, you never invest a whole lot in gold and gold stocks such as Barrick would be a good investment,

00:39:27

Suze: but you will see gold according to them go down to about 1850 in the next little bit here, which is the time to get in and then it will go up to about 2500 or more. So that's just something to think about. Many people thought that we are in recession. And if we're not already in recession, we will be in recession by when, by September of this year, only time will tell

00:39:57

Suze: they think that very shortly here that the feds will start to have to lower their fed funds rate or we're gonna go into a really deep recession. And again, in doing so, interest rates hopefully will come down, inflation will come down. However many people will continue to lose their jobs. I think the advice that we've been doing over this past year

00:40:26

Suze: is pretty much in line.

00:40:28

Suze: So that's a summary of everything that I learned.

00:40:35

Suze: I hope you found it interesting. All right. So again, Happy Mother's Day, everybody. And until next Thursday when KT joins me for Ask KT and Suze Anything.

00:40:50

Suze: Remember today, wherever I go I will create... Are you going to say this every day? Yes, you are. I will create a more joyful, peaceful and loving world. And if you do that, you will be unstoppable. See you then. Bye bye.

00:41:17

Music: Music (out)


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