Shutdowns, Inflation, And Strike ... Oh My!!!, Ep. #196

The team discusses various topics in this episode of The Capitalist Investor. They cover the looming government shutdown and its implications, the autoworkers strike, Joe Biden's visit to the picket line, and the closure of Target stores due to theft. They also touch on the inflationary environment and the potential impact on the market.

Key Takeaways:

1. The government shutdown may not be as urgent as previous ones, but it can still have significant effects on travel and certain government services.
2. The autoworkers' strike is primarily about higher pay, but the transition to electric vehicles could lead to job losses in the industry.
3. The closure of Target stores in Chicago, Seattle, and San Francisco is due to theft, which could lead to higher prices for consumers.
4. The market has been reacting negatively due to concerns about inflation and the potential for higher interest rates.

Transcript

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Hello and welcome to this week's episode of The Capitalist Investor. As always, you have myself, Diamond, hands deep, and we got Tony the Tiger and back again this week. Dave about. Great to be back. Dave's back cause we got Luc just jet setting everywhere. International man of mystery. All right so so days back and we got lots of news to talk about this week. So yeah, I think we'll get into kind of the looming government shutdown and kind of the implications of that. We'll talk a little about the autoworkers strike that was pretty much everywhere yesterday. So we'll talk about that. And, you know, Joe Biden's 18 minute visit or whatever it was. It was only there for eight days. Were they booing him? I haven't seen any clips yet. I got. What is it like? Was it high fives or was it like low five? Yeah. Like, Oh, Brandon. Yeah, it was stuff. There's a there's a still picture. One of the one, one of the, you know, works. Yeah. And he just has a very, very foul look on his face while he's listening to the. President, which is Adam. All right. And then we'll talk a little canceled. We'll talk about some more Target stores being canceled and kind of what it means for for the retail space. All right. Well, so, yeah, there's been lots of movement this week in the market. You know, I would say probably the two main drivers for that are what people are realizing about interest rates and kind of what we've been talking about here for a long time now and the government shutdown. So it looks like we have until Saturday. Is that right? Saturday at midnight? Yeah, it's like Sunday. Could be the shutdown, right? Yeah. So we need to get the the legislation passed to continue the funding of the government. They're in short term negotiations now to try to kick the can down the road. So what do you think, guys? What what what are kind of the big pieces to to that that we need to get passed to make sure the shutdown. Does this one seem a little bit less urgent to solve like it doesn't seem like they're running around the Capitol trying to figure out the budget this time. And I my my theory is that, like the last time was such a big urgency because they usually go on their recess for like a month or two or whatever. They take a nice long vacation. And if they're on vacation, they can't. So I think there was a huge push just to get it over the goal line to end so that things would operate up there. Yeah, exactly right. Right. But in that amount of time that they solve or plan or I won't say solved, but extended the the debt ceiling talks, I think we racked up another trillion dollars of debt. Why not? You know. Yep. But this time, it sounds like it doesn't feel like it's as urgent. I think everyone just got the drill now. Like, we just we just posture and politically wrangle until the deadline and then we might let it lapse for a little bit. But eventually we just kick the can down the road further. Right. Right. Is that pretty much how this works? Yeah. And try to scare people in the meantime, talking about all the great stuff the government does and why it can't be why can't be shut down. What was on the list this time? The the women's women's and children's shelter. Yeah. So, I mean. Like, they really that's that's the first thing that's getting cuts, right? Yeah. It affects 7 million women and children and done like so I started taking just a peek at like what's going to be affected and what won't. So we'll talk about like things that will still continue to go on and it's probably they said roughly about 75% of the government will still operate. So things not affected. Medicare, Medicaid, Social Security, you'll still get your mail. Military will still be active law. Those are the main primary things that will still stay on. Things that will crunch will be first travel. It will can. If travel wasn't worse right now, it could get a lot worse if this doesn't get solved because the air traffic controller and TSA are paid through the government. So there's no one there to land planes and let them take off. And then the TSA will still work, but they will be furloughed. So if this again, goes on longer than a couple of weeks, how long are people going to show up to not get paid because they're going to get furlough? Like, yeah, we're keeping that. We're keeping track of your hours. We got a tab over here. Right. So the travel is is a big issue because it's already it already stinks everything. I don't know what the averages, but I would say at least 25, if not more percent of flights are delayed or canceled. Mm hmm. Sure. The EPA will be shut down. So, I mean, the green agenda might get pushed aside. You know, you got people running around dumping toxic waste around watching them. It's very extreme, But. But the EPA get shut down and then, you know, one of the other things was that there was see, like women, Infants and Children fund will be depleted. And that affects roughly 7 million women and children across the country. And that's not good either. So but it's not a complete shutdown. Things don't grind to a complete halt. So I don't know how I don't know how urgent it is for them to figure this out while they again, what you're saying they posture for for things that they want to do and don't want to do. Yeah, that's my take. I don't think you're off base. I mean, historically, we've talked about earlier this ends up turning into nothing. Right. Right. A little. It's a headline. A headline. It's an opportunity for the politicians to try to push some of their agenda. But at the end of the day, it gets punted down the road. Yep. Yep, for sure. And it looks like in 2018, about 850,000 out of 2.1 non postal federal employees were furloughed. So that that's a pretty big chunk. And it looks like it wouldn't be as bad this time. So but it sure is kind of sending I don't know the market always seems to react to to the shutdown negatively like, you know, pretty substantially like every time we go through this. And it always seems to be not that big of a deal. So. I mean, there's going to be some people just not getting paid. And I guess that affects, you know, different aspects of the market. I guess I, I don't know. I mean, yeah, it like I said, I think it's more of a headline than anything else. And I think historically the pattern has been the risk is out there and it's the market kind of, you know, adjusts in that real time moment. And then once it passes it, like all the hedging and everything that went on, there it goes away, evaporates and the market bounces back. So that's historically. Yeah. This is the way it works until it doesn't, right? Yeah. Well, so all right, before we move on, are they are they going to come up with something before Sunday? They've I'm to say No. No. Derek. Yeah, I'll say yes. Yeah. I think they're going to put it. I think they're gonna slap a Band-Aid on it and move on and punt for another couple of months and let it fester. So stay tuned. All right. They, they've looking for a clear cut, whatever. And what did they say? They said something like they. They want an uncapped so spending. Mm hmm. And I'm sure they do. Yeah, that sounds good. Real good. Like so. Yeah. Where's my cut? All right, moving on. All right, so we have the auto strike is is in full force, right? It's. It's. It's affecting, what, All three, all three automakers. So a unique thing is, is that, you know, we're taping this show on on Wednesday. It'll air on Thursday. And on Tuesday we had President Joe Biden visiting the picket line. I believe that's a first for any president to go and visit a strike and that may have been, uh, started and kicked off because former President Trump said, Hey, I'm going to show up on the 27th on Wednesday. So all of you know, so Joe got a late agenda to go visit. So I thought that was pretty interesting. But it feels like the strike is about higher pay. And, you know, because they're saying, hey, all the CEOs are making 40% more. We want 40% more. And well, that sounds like just a trickle down effect to me. Once you have to pay everyone 40% more money, that means I'm pretty sure everything that's related to car or car parts are going to cost 40% more. It sounds inflationary. That's inflationary. You know, And then you have Joe, you know, Joe Biden, president show up to a strike that is, you know, with his agenda, with his agenda and clean energy. You know, they are estimating that if the transition to EVs happen, it should it could destroy nearly 30% of all current auto worker jobs. Yeah, because it's, I guess, easier to build an EV, like just less less, uh, intensive capital intensive process. So you don't need as many workers. Say it's like putting a Lego kit together. I believe it. Yeah, I believe it. Mm hmm. Just a lot less moving parts. Is that easy to think so? Yeah. Simplify, right? I mean, how many parts are in an engine. Or a. Lot? How many parts are, you know, you know, you're not dealing with mufflers and, you know, catalytic converters and engine parts and spark plugs, Right? You got a battery? Yeah, that's, I guess, the easy way to put it, if. They factor in the shorter lifespan of the vehicles, because maybe you don't have to, they're easier to put together, but you got to build twice as many. You know, in a couple episodes. In the past we were talking about EVs and I got on my soapbox on on electric cars and the average fossil fuel car on the road today was something like 15 years old or something like that. And the average age EV on the road was like two and a half years. I don't know if that's the shelf life. I don't know if that's just because it's new, newer technology. But Teslas have been around for what, like eight, ten years now? I don't. Know now. You know, I think I think we're a little bit off on that conversation. We should probably revisit it to make sure we are, in fact. Fact checking dirt. And just because I remember this conversation and we actually never really put a bow on it after talking about it, because I do believe that it's much easier to maintain an electric car versus a traditional gas car because there's just no moving parts or there's there's not as many. You know, the the the the the engine of an electric car is much easier to maintain than internal combustion. So would the Teslas. They had quality control issues, you know, like the seats, you know, not being right and things like that. But the actual drive train I believe, is supposed to last a lot longer and costs nearly nothing to maintain. Yeah, I, I find it hard to believe like because I did the quick fact checked on something and they and like I said the the the fossil fuel car is 15 years and then the the electric car is to like it didn't the that that doesn't make sense especially what we talked about because I think even fact checked me on the brakes I'm like you know like it's a heavier car. The brakes are me like, no, it actually slows down quicker and then ruin the rotors. That's definitely better for the brakes. The glitch with the the battery, like once the battery shot out, you. Kind of I just I mean, it's expensive to replace. But you could you can like I know the Teslas if you really wanted to you could replace up the whole battery system. For how much? I don't know. No one knows. But black box. Just buy it. But just buy it. We'll we'll we'll talk about it a little the next week. I'll I'll I'll bring some facts back. But I think we I was looking at my phone here. Biden was in Michigan for a just over an hour total time, really. And he was at the picket line for 12 minutes. So he flew in. He went down. Did you see they have to put the short stairs out for him now to get out of the plane now. So he's he's gotten off like in the under the belly of the plane now. So the staircase is shorter. I don't just get him an elevator. That's that's why we need, you know, one of those like one of those what do they call those? The jacks at the construction sites where, like, you just kind of scissors up and scissors down. Slide. Right. Just slide. What about who's an Asian singer? Um, what's that guy's name? He had, like, that one famous song. So, yeah. I'll look him up. But when night that he was onstage. When he's on stage, he comes from under the stage and then, like, shoots him up. That's what. I mean. I've seen, like Eminem and like, you know, 50 Cent do that and their halftime shows at the Super Bowl. Anyway, so yeah, so 12 minutes. But I think your point on the kind of the snowball effect of all these strikes because it's not this isn't our first rodeo we've seen a bunch of these. Well you had to come and what was it you you UPS drivers it was a. Teamsters. Yeah. Do ups. They got what they wanted. You know, I think like the total package for all these UPS drivers went up to like 170. That's not their pay. I mean, I guess it was like part of their pension and like total comp, you know, so they might still be making 120, but the other 50 to 70 grand is pensions and health care and things like that. Now we have the auto workers and now I just saw something where all of the hospitality in Vegas, they want to start striking. So who's after them? You know, it's this snowball effect of, hey, well, they're they're asking for it and getting it and yeah, I think you just hit the nail on the head, though. What it really leads to is higher inflation. It's very inflationary environment right now. It sounds like the odds that the casinos are going to get much worse. They can't. Well, MGM is still off the grid. They can't. They're still hacked. I haven't heard that they got turned back on. And I talked to somebody who went there last week. They said, yeah, like you can you can go and do things. But like they couldn't use like their comp cards, they couldn't play slot machines. They couldn't like. So I mean, I don't know how they're making money. I mean, I guess they're like, I wasn't there to gamble. I was there to go to the polls anyway. And I'm like, Well, I guess the water still comes out. The faucet. The deejay can still play music. So I guess we got a party. So I don't know what. It's very tight lipped in Vegas. It sounds like they're still hacked and they're not paying. And I wonder it's worth like hundreds of millions of dollars a day or something. I would assume, right? Yeah. All the gambling losses turn out. Remember, they say, like, all your money goes to turn on those lights. Yeah, well, say. All right. A quick, quick fact check on myself as a Gangnam Style, you remember? Oh, my. God. Yeah. CI fi. Is that how you pronounce it? Yeah. That's the guy. He's still, like, uber famous. He's, like, the most popular pop star. He's still famous. Yeah, well, I mean, if he set it up right and get the right royalties, like I sent for life with that one hit, one hit wonder, and then the canceled. So Target came out today and mentioned that they're going to be closing around nine stores nationally. And they are primarily in Chicago, Seattle and San Francisco where theft you know and and in the when you start listening to the earnings call, they'll be calling it the shrink. And that is theft by either employees or, you know, smash and grabs or vandalism and things like that. But I believe that, you know, they mentioned that the between all the box stores that they're they have lost nearly 500$500 million of merchandise the like this entire year. And I don't know again, sounds inflationary because they're not going to just eat that loss. They're going to pass that along somehow, some way. But I mean, it's unfortunate, right? Yeah. Russell, consumers are going to pick up the tab on that one. Certainly. And who would have imagined that? You know, when you take away the criminal aspect of the the theft. Right. It's going to lead to. More. People doing exactly that. Right? Yeah. Well, I mean, you like see on Twitter, like people walking down like Rodeo Drive and stuff like that. And some of these big shopping, you know, places, you know, like where you'd go and hit up a great series of shops and stuff are closing down. That's that's sad. Yeah. According to the Internet, I think Rodeo Drive is completely shut down. Is it. I'm I'm not. Going to go. I don't think there's any stores there. I've seen it. And then again, I kind of. It could be just. I kind of believe and I kind of believe and don't it you know, it's a 5050 of my belief and what I see on Twitter, right? I'm like, how many likes that this person done before Blue check. Right. Everyone has a blue check now. You can pay for it. Okay. Yeah, that's. That's the that's the bad. Part to paper the blue check. Right. The start of the pot. Right. $9 to stir the pot. But everything just sounds inflationary. So like you have the consumer is going to be stressed if they start raising prices because of this. And then energy, you know, energy's going to be going up. And it has been steadily going up all summer. We were up about 30 or 35% since the beginning of summer. Oil's cresting over $90 a barrel. And I believe OPEC in Russia came out and said they're going to continue to limit supply even more. So we could see $100 barrel of oil here in the next coming weeks or months. It's kind of again, I like it inflationary. Yeah, And that's our whole topic of today. Everything's machinery. And at the end of the day, that's why the market's been reacting so negatively over the last two weeks because, you know, now none of these issues are going away. They're not getting resolved. You know, I think when we're sitting here at the beginning of the year, you know, the the base expectation was for, um, for us to be cutting rates by now. And we pointed out that that seemed kind of crazy. And I think where I think we're years away from seeing rates being cut. Something bad would have to happen for them to cut rates. Exactly. Some type of black swan event, I believe know like the coalbed and stuff like that, you know, but the one thing you can say is at least they have the bullets. I mean, interest rates and borrowing rates have been rock bottom for years and if there was a calamity, there was nowhere to go because they were the Fed rate was near zero or no, they're up to like four or 5% now. They got a lot they got a lot of bullets in the gun to fight, you know, whatever might come down the pike. But again, that sounds inflationary because things are just really escalating. So if you make everything more expensive, it should bring down demand and prices and stuff like that. Right. And that one of the Fed speakers came out, I think, in the last couple of days and increased the chance of a hard landing person. Think you might be a little bit low on that one still. But you know, basically saying rates are here higher for a longer, even longer than or even higher than where they currently are. So taking some air out of the balloon with that one, like you guys said, the Fed took some of the hikes out of the equation. So their dot plot, you know, they're imaginary or their projected interest rate for the next several months and years has been extended out. So all signs are pointing and it's really consistent with what they've been saying the whole time, like were anticipating rates to be higher for longer. Mm hmm. I don't think Powell changed his tune on that one right now. And I believe the last time he talked, he did not raise rates and it was like a week or two ago. But there at that time and I haven't checked what the recent probability was, but it was a 5050 chance that they raise a quarter in their next meeting, which is probably coming up in the next probably 4 to 6 weeks. So we'll see higher dollar, higher interest rates. That's that's a problem for the market. So. All right. All right. Another fun, another fun and exciting. So I have to. Well, we try to do these current and current topics and they just haven't been that great to talk about. But what we what we will do next week, I will bring the all the facts and figures that everyone needs to know about Teslas, how long that how long they last. And yeah, give me. Give me some how much it costs to replace the battery and if that's even possible. So we'll talk about that a little bit next week. But thanks for everyone for listening this week. You know, if you have show ideas comments hit us up at info at connected Com and we'll talk to you next week.