The Economy Is Not Broken. You Are Just Being Told the Wrong Story.

Wall Street is questioning whether AI infrastructure spending will deliver results fast enough, while energy is starting to challenge technology’s leadership in the S&P 500.

Oil prices are rising. The cost of building homes remains elevated. Mortgage rates are back above 6.8%. Airlines are under pressure. And yet, new business formation data tells a completely different story than the job loss headlines ever will.

That is the bigger conversation I had with Michelle Connell of Portia Capital Management and Andrew Tang of Turner Financial Group on Wealth Transparency. We covered the forces driving the economy right now, from inflation and housing to energy, challenging technology's leadership in the S&P 500, AI infrastructure spending, and why the headlines do not always tell the complete story.

Markets are always moving. Understanding what is driving those moves matters.

Wall Street may be asking the wrong questions. Listen to the full episode of Wealth Transparency, subscribe for more conversations like this, and share it with someone who is tired of getting perhaps only part of the bigger picture.

Chapwood Investments, LLC, is a partner of Ethos Financial Group, LLC, a Securities and Exchange Commission registered investment advisor. No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed in this webcast or video. The guests appearing on videos do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results.

All investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
No mention, opinion, or omission of a particular security, index, derivative, or other instrument in this webcast or video constitutes an opinion on suitability of any security. The information and data in this video were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. The guests appearing on videos do not receive compensation or provide endorsements or testimonials.
Securities are offered through Innovation Partners, LLC (member FINRA/SIPC). Ed Butowsky is a Registered Representative with Innovation Partners LLC. Ed Butowsky is licensed to business in: CA, FL, LA, TN, TX.
Innovation Partners LLC and Chapwood Investments are not affiliated.

Transcript

SPEAKER_02 0:25

Hello, welcome to another edition of Wealth Transparency. This is the well-known and up-and-coming podcast where we go into headlines that are out there that people are not that knowledgeable about, and we talk about how these storylines impact your portfolio. We get into uh you know them pretty deeply, and these two experts we have we have Andrew Tang from Turner Financial Group and Michelle Connell from Porsche Capital Management. And uh Michelle is out of Fort Worth and Andrew is out of the New Jersey area. And if anything you hear here prompts you to want to talk to them, please reach out to them. They are the best in the business. I promise you that. I'm Ed Bichowski and I'm the host. And let's just jump right into this. Uh Michelle oil, you know, we talk about it all the time. We're approaching $95 a barrel. You know, that's gotta be the biggest economic story and the number one, you know, story out there today. What is your view about oil prices and where should people put money as a result of oil going higher?

SPEAKER_00 1:35

Well, in the last month, because if you look at where we are now and the jump just in the last few days, we are up 30 to 36 percent in terms of oil on a per barrel basis. And that's really important because that affects the GDP of our country. So every time you have an increase of ten dollars a barrel, your GDP you can expect it to go down 0.2 to 0.3%. So when you've had a 30 to 30 percent increase such as we've had in the last 30 days, it could definitely be.

SPEAKER_02 2:15

So where would you put money as a result of oil prices being where they're at and possibly going higher?

SPEAKER_00 2:20

I know where I wouldn't put them. I think we're you know, we've seen airlines get crushed today, right? With American come out and take down their earnings estimates. I think anybody that can increase their prices and has the flexibility to do that and pass them on, and there are a fair amount of industrial stocks where you have that ability. Also, technology continues to be an area where you can pass on prices. Taiwan Semiconductor said the other day that they will probably be increasing their prices before the end of the year by 10%.

SPEAKER_02 2:59

Because wow, that's that's really insightful. Andrew, where would you be putting money as a result of oil prices being where they're at now and possibly going higher?

SPEAKER_01 3:09

Yeah, we see a lot of excitement and uh topics circling around solar now, and that is more and more evident the case. And so alternative energy, it's still one of the areas that is hasn't seen is day in the sun yet, you know, so to speak. But solar sector, it's coming back to life. And also you see some of the smaller cap uh oil companies are going to do well. But I have to tell you, this whole sector is kind of priced in, and I don't expect it to, you know, double anytime soon, for example, because most utility companies and oil companies they have a lot of debt to follow. Looking at oil prices in a silo, you know, with August futures at over $100 a barrel already, uh, we can see that perhaps the oil prices will stay higher at these levels for more than a month, just based on the futures. And so, with that said, we will know that we want to explore other areas, meaning the oil, fossil fuel alternative area, and that's where we see the upside.

SPEAKER_02 4:16

So, not that I'm recommending this, I have to say this for compliance purposes, but there is an ETF out there that is screaming to be bought, and that symbol is E R Y. And that is two times the bear on oil. And if oil prices go lower, this will go two times lower or will go up two times versus oil and oil company stocks going down. So if you believe that oil is at a high or close to a high, you might want to buy ERY because that is bearish and two times bearish on oil prices. Uh, but again, I do not take that as a recommendation uh and all the other compliance jargon I have to throw out. But I then want to move over to mortgage rates, kind of surprisingly eased in the last week. You have the 30-year mortgage at 6.6% and showing a little bit of improvement for buyers. So, Michelle, why don't you tell us your view on homes and home building right now and people buying new homes?

SPEAKER_00 5:21

I think it's even though uh mortgage rates have eased a bit, that area is still really hard because to build a new home, it's gonna take you at least one to two years. Or if you're looking at a commercial property, which my foundation is right now, versus if you want to buy something, it's one to two months. If you look a little bit closer to the home building industry, the new homes that are being built this year are about five to six percent lower in terms of number. And the reason behind that part of it is the cost. Costs in general for a new home are up six to ten percent, and the metals that are used in a home are up twenty four percent. So it's still really difficult, especially for a first-time buyer, when you have that type of cost behind it. And it's difficult also for the builder, right? Because it's a lot of money to put up front if your costs are going up, you know, just six to ten percent and the metals are going up almost 25%.

SPEAKER_02 6:24

Yeah, and I wonder if there's more new homes being bought or if the pre-existing homes are being bought by buyers now. Uh do you know if there's a statistic out there, Michelle or Andrew?

SPEAKER_00 6:38

In Texas, you have more existing homes being built. I did not know this because you get you probably know this, Ed, because you have children that have been looking at buying something. You get hurt the second year of taxes on a new home. It gets reassessed in value the second year that you own the home. And so your tax bill has a probability of going up quite a bit the second year that you're in that new home. So if I were a buyer, especially in our part of the world, I'd probably look at existing. You know, find something that's good and you're not gonna have to put a lot of money in.

SPEAKER_02 7:15

Yeah, that's it would try to take advantage of other people's misfortunes.

SPEAKER_00 7:20

Yes, yes, exactly.

SPEAKER_01 7:23

Yeah, buy buy a fixer upper and then uh try to do uh more repairing or upgrading yourself. That is uh that is something that you can do. I mean, I I'll talk a little bit about prices in terms of dollars. You know, right now the medium existing home sales price for June is $440,600. I mean, that is a very high number. And then the new home sales prices uh for June is $540,000 and $600. And a month away from that, that was for June. And then for May, that was $424,900. So you can see this jump, you know, anywhere from three to five percent in a month jump, it's it's quite high. And the reason for that is that there's not enough inventory. And then uh for the average home value, meaning if you count all the beat up homes as well as the nice homes, the national average is 372,000, somewhere around there. So you can see that the high prices are here to stay. And going back in the 30-year fixed mortgage rates right now, it actually spiked up to 6.8. So 6.8% right now. And that's if you have perfect credit. The average probably averaged in, you know, when the 10-year yield came down. So the conflict in between US and Iran and with the oil prices going higher, it's not helping prices at all at homes, also. And so the home buyers are feeling the pain. It does give incentives for the existing seller who wants to put more inventory onto the market. But the problem is uh the buyers. The buyers are having a hard time closing, they're taking longer to close, it's more difficult to close to get approval. So sometimes you see for sale sign under contract for a longer time, you know, outside of the homes out there. So unfortunately, that is the truth. And it's very painful for you know, for the home buyers and also for you know the homeowners as well.

SPEAKER_02 9:22

So a lot, you know, have been blamed on the war. And one of the things that we've always, or at least for the last, you know, five years, have held you know pretty strong in our beliefs is that technology has been moving the SP 500 index. But right now, energy is starting to replace the technology on the most important sector of the SP. So, you know, with energy stocks starting to move up, you're starting to see some technology stocks drop down. But you have oil producers, refiners that have you know started to move up on the SP sector list. I don't know if I said all that correctly, but Michelle, do you want to kind of give your view on the SP 500 and what is moving down and what's moving up?

SPEAKER_00 10:08

I think the fact that we can say oil is uh doing well and technology is not doing as well. If we look below the surface, you have to look at it by a name by name or company by company basis. There's some tech stocks that are still continuing to do well. That being said, I think rotation or at least having more than just tech in your portfolio is important. Energy uh it might be a little bit ahead of itself at this point. That's why you were talking earlier about the two times bare ETF. So I'd be very specific about what you own. I think there's still some utilities that look interesting. Healthcare, there's a lot of money in a lot of these big pharma companies that need to buy growth. I'd be looking at those. And even some consumer discretionary that's been really hurt because of the war with coming back online. That being said, I'd probably stay away from restaurants because you're seeing a lot of those close because of what's going on in our economy.

SPEAKER_02 11:10

Yeah, there's other reasons to stay away from some restaurants like Taco Bell.

SPEAKER_00 11:15

Yes, I forgot about that. That's right.

SPEAKER_02 11:18

Yes. So Andrew, why don't you uh tell us your view on this?

SPEAKER_01 11:23

Yeah, uh on restaurants, I would never really consider seriously investing in this particular sector. I've operated and owned restaurants in the past, and I'm telling you, there's just way too many variables. Cost is growing out of control. You know, the biggest cost is uh supplies and labor. And both of these areas are not gonna are going down anytime soon. And then you have also rent. You have to pay all these upfront costs and huge operating costs and open your doors and waiting for customers to come in. And that business model, it's it's not easy. It's very difficult. Now, going back to oil, this is really a reflection of uh the short-term flight to safety rotation that we see in the marketplace. Tech is still, in my opinion, it's still the most valuable areas here. Of course, everything ends in the bubble, but this bubble hasn't really fully formed yet, in my opinion. And the street now is challenging the theory of AI infrastructure spent because Wall Street Mine is so short, uh, you know, so short term that they are challenging the idea that all the capital expenditure dollars going in, they're not getting the instant satisfaction in the next quarter or two quarters earnings from now, right? And so they even challenge Alphabet. Alphabet is spending, increasing their cap acts. You can say they're doubling down, but they're building something greater, right? Just like if nobody, everybody operated with the Wall Street short-term mindset, then the internet wouldn't be built. Let me put it this way. Okay, that's a very, very strong statement there. So the hyperscaler they're spending right now is for the future benefit of the entire mankind. It's not just for those companies, okay? The level of intelligence that we are it that we're achieving, we are heading towards efficiency. And that's why Kimmy came out as the newest large language model for Moonshot, alongside with DeepSeek. They are challenging the existing large language models to become more efficient. So, all that happening behind the scenes, in my opinion, it's a natural progression towards efficiency and towards uh a higher yield of uh intelligence. So, my opinion, and tech is still the leader here, but the short-term flight to safety has put oil into the spot. Why? Because people don't want to buy consumer stables. Who wants to buy consumer staple when you have GOP1 and people are consuming less junk food and less grains and less carbohydrates, right? And so I'll stop here.

SPEAKER_02 13:49

No, no, no, no, that's really good stuff. And I mean, something else that isn't going away, like technology isn't going away, isn't it? And the inflationary pressures uh uh due to geopolitical events has really become a major issue, especially into the uh political season that we're about to enter into. So Michelle, uh why don't you tell us about uh you know your thoughts on inflation and what does the government need to do to tame it?

SPEAKER_00 14:19

Unfortunately, I don't know how much they can do to tame it because so much of what we're being impacted by is because of what's going on in the Middle East. It does concern me though, when I look through some research today, 95 of people polled said that we are in an affordability crisis. Two-thirds of the people polled said that they cannot afford groceries. Now, more often than not, when we're in line buying groceries or your spouses are buying groceries, you assume everybody that's in the store, the majority of people around you can buy groceries. That does not seem to be the case anymore. For two-thirds of people, I don't know where the poll was. Two-thirds of the people that responded said they cannot afford groceries for their family. That's serious. And the people that don't have money and aren't billionaires, they're gonna try to impact what they can through their vote. And so I think it's not just expectations right now in terms of earnings. I think there's gonna be more focus on midterms and how the politicians are going to try to address this and our deficits. And then, of course, that's going to affect what we're going to see with the Federal Reserve.

SPEAKER_02 15:35

Yeah, the affordability crisis. I just wrote something on Substack about this. Okay. And I think it's really just been prompted by the media. They they latched on to this affordability crisis and want to lay it at the feet of Trump. But the affordability crisis, you know, this is really a hangover from the Biden administration because prices rose 4.9% on average every for four years under Biden. And prices don't go lower. The inflation rate, which is the rate of change, might have slowed, which it has. But that doesn't mean that the manufacturer of a widget is going to go in and reduce his price if he's able to sell that widget at a higher price. Uh, as long as people are buying things, I don't see affordability being an issue. Andrew, what is your thought?

SPEAKER_01 16:28

Yeah, I think affordability really limits down to housing, and housing is the one area that there's absolutely no no no FUD around there. There's there's no dispute there. Okay, we do need to uh produce more affordable housing to take care of the folks so that there'll be less homelessness. Now, on the other side of it, about uh consumer spending, and uh that goes hand in hand with the job loss data that you're you're hearing, right? Because remember the rhetoric not too long ago, they were thinking that, oh, is the economy going into a recession? No, because we haven't had a recession, you know, the fact of the matter is that we have had a rolling multiple period, continuous period over two years of uh slowing economic activity. I called it a rolling recession from the results of 2022. And don't forget that inflation was as high as 9% on a monthly basis not too long ago, as a result when the rates weren't high, and as a result of the COVID money showering people while they were staying at home shopping at Amazon, okay, while all the manufacturing has shut down. So that's the real hard and that's what's driving this inflation. I always have to keep the audience in mind that inflation caused by demand is the bad inflation. Inflation, and you need to raise rates to slow down inflation from demand. Inflation cost by supply. You need to ease the pain because if you supply, which is the temporary oil prices high, or any kind of a component of manufacturing that is higher, could be commodities, for example. And then inflation that is caused by demand, which is too hot out of the economy, too much money chasing too few goods. So I have to you know reiterate that I don't think we are entering into a higher rate, meaning the Federal Reserve should not raise rates. And I believe inflation is much better than what it is right now that is showing in the short term. And also the economic data of job losses that you hear, uh a couple of hundred thousand here, Volkswagen 100,000 there, Microsoft 8,000 there. What they're also not telling you is the new business formation data that is also the other side of the story here. And new business formation, for example, one private company that releases that is the Register Agent Incorporated, RAI. If you look up their new business formation monthly report, you see that roughly about 500,000 new businesses were formed, okay, on a monthly basis. And that is a great offset to the job loss data that you see because once you become an entrepreneur, when you lose your job, you take yourself out of the jobs market. And again, you know, this is very exciting news. And I think uh we need more of a balanced approach when it comes to assessing the economy. In my view, the economy is chucking along just fine. There's not a risk of going into recession. I believe it's the complete opposite. The years and years of expansion and achievement that we have gotten from innovation and technology is helping us to do one thing, is to do more with less. When we do more with less, then we can agree that this is a deflationary environment. And as a matter of fact, I do see that happening as well. So the short-term spikes in inflation is caused by political conflict. And I think that over time will be eased and will be offset by the achievement that we have accomplished and in progress now with the tech expansion.

SPEAKER_02 19:53

That's interesting. It's a very interesting view. So I want to thank Michelle Connell with Porsche Capital Management in Fort Worth and Andrew Tang with Turner Financial Group out of New Jersey. If anybody watching right now wants to reach out to any of either one of these people, please do. Uh, they'll be happy to answer questions and develop a relationship with you. I'm Ed Buchowski, and I really appreciate all of you watching. And please share this with everybody and anybody that you know that might benefit from the knowledge of these two brilliant people. So thank you very much, everybody.

SPEAKER_01 20:30

Thanks for having me. Sure.