The Capitalist Investor - Episode 141

Every week the guys come in prepared and ready with their takes on the latest news, politics and trends – but this time around it’s all about returning to their roots and talking about the markets. In Episode #141 of “The Capitalist Investor,” Luke and Tony dive into the Fed’s Jackson Hole trip and what will happen if Powell decides to be hawkish or dovish. The guys also analyze behavioral finance trends taking place in their everyday lives and debate Biden’s latest student loan debt policy. This episode’s focus may be on returning to the root, but the guys are prepared to pivot, pause, hear each other’s takes, and yours.

Outline of This Episode:


  • [1:20] The course for Jackson Hole 
  • [2:30] A hawkish Powell or… 
  • [6:55] A dovish Powell
  • [9:35] Behind the scenes of behavioral finance 
  • [12:15] Canceled this week: student loans 


Episode Summary:


The Fed’s trip to Jackson Hole will be the biggest market mover this week 


Later this week, the Fed will have its summer gathering at Jackson Hole, Wyoming. There, they will meet to discuss whether their policies are working and make decisions that will certainly influence the future of the markets.

This year’s gathering largely focuses on the current inflation crisis and the Fed’s plan for interest rates. There are two things we think can come out of the Jackson Hole meeting: Powell will either remain hawkish or become dovish.


The Hawkish side 


If Powell announces the Fed will stay on course, it means it will remain aggressive and continue to raise interest rates. While traders want to see light at the end of this tunnel, there is still inflation to combat. We have to take our medicine.

Continuing to raise interest rates will have some pros. It will destroy demand and taper inflation. But with pros, there are always the cons.

If the Fed decides to stay on course, they have to make sure to get the course right. Raising interest rates too high too fast can lead to a disaster, and vice versa. Powell needs to make sure that whatever they decide, it will be a soft landing. A hard landing will only bring us into a deeper recession.


The Dovish side 

Let’s say Powell comes out and says in a dovish tone, that the Fed will stop raising interest hikes, slow them down and basically give an indication that he’s going to start unwinding – the markets will rejoice. That’s the pro to a dovish tone.

But the downfall of a dovish Powell is what long-term investors can easily identify. Inflation will continue, and demand will remain a problem. They will see that Powell buckled – there’s so much pressure on him since he started tapering too late, and he buckled under that pressure despite knowing what he needed to do.


There’s pros and cons to a dovish and a hawkish Powell, so now what? 

At the end of the day, it really just comes down to active management. One has to be able to pivot with their portfolio, work with someone who is actively managing portfolios and have a dedicated team who’s paying attention to these things.

Everyone is looking for any indication on what Powell and the Fed decides to do, and it’s essential to keep your eye on it – watch the things that are important, be prepared to pivot when the decisions come to light.


What’s ‘Outta Here’ this week? Student loans – well some of them 

When it comes to finance, there’s things that you know. There are things that you don’t know and that’s why you’re actively reading the news, doing research and even listening to podcasts like ours. But then – there are just things you don’t even know that you don’t know.

And that’s why the issue with student loans means financial education is important.

Biden recently announced his plan to forgive student loan debt – officially. The administration plans to forgive up to $10,000 per federal loan and with certain grants, even more.

Social media has been rattling all week about Biden’s forgiveness policy but we ourselves have some quick observations.

With how big this type of cancellation is – it penalizes a lot of people out there. It penalizes those who tried to eliminate their own student debt fast enough to get it off their balance sheet. It even penalizes the people who didn’t go to college. Why? Because this money isn’t appearing out of nowhere. It will come out of everyone’s pockets.

At the end of the day, this may be a tactic for the Dems to capture more voters before the midterms and upcoming presidential election. But it might actually end up hurting them in the long-run. People on both sides of the ballot seem upset by this policy. On the left, $10,000 doesn’t even scratch the surface of their student loan debt. On the right, it will raise inflation and penalize millions.

If there’s anything we’ve learned from the past two years, it’s that printing more money and artificially stimulating the economy will create crises. It’s going to make inflation worse, and when it does, how will the Fed respond? Probably by hiking rates up even more.

Student debt is a tricky situation – but there are ways and ideas out there to solve it without changing the current system vastly and printing trillions of more dollars.

A lot of people are upset by this newest policy and whether it’s actually brought to fruition, there are a lot of hoops to jump through. But for now, it seems, student debt – or at least $10,000 of it – is canceled if you have it.

Keep Listening to The Capitalist Investor:
Episode 15:
Spending Strategies in a Bear Market, Ep #15
Episode 31:
Handicapping the 2020 Election, Ep #31
Episode 47:
11 Investments in Your Home That Pay Off, Ep #47
Episode 63:
Jeff Bezos and Amazon: Past, Present, and Future Ep #63
Episode 79:
7 Ways Biden Plans to Tax American Families (Part II), Ep #79
Episode 95:
5 Beaten Down Stocks to Buy on the Dip, Ep #95
Episode 111:
Special Episode – Talking Energy with Daniel Turner, Ep. #111
Episode 127:
Retail Earnings Tank & What The Heck is Greenflation? Ep. #127