How Joe Biden’s Stagflation Is Destroying Your Retirement Nest Egg

Transcript of Peter Navarro's Latest Taking Back Trump's America Podcast

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Hi. I am Peter Navarro. It is March 16, 2023; and as I write this, both the bond and stock markets are experiencing continued and significant volatility and my guess here is that, unless you are a financial wizard, any investment portfolio or retirement savings you might have are down for the last 12 to 18 months.

To be clear, I am not a financial advisor but as an economist I can at least explain to you what is likely going on broadly with your portfolio if, as most people do, you have depended on a financial advisor to guide its construction.

As a preface to this missive, I cannot tell you how pissed off I am at companies like Goldman Sachs which just made 100 million bucks off the banking crisis and hedge fund managers like Steve Schwarzman and Ken Griffin who, like parasites, are sucking at your blood in your portfolio. These hedge fund managers are making billions at the same time that millions of Americans cannot pay their rent, electricity bills, or even feed themselves adequately. Meanwhile, it’s the Schwarzman’s and Griffin’s of this world who are bankrolling both Democrat and Republican opponents to Donald Trump, the one guy that can fix this crisis and restore America’s wealth and prosperity.

On this Trumpian point, I am reminded here of a poignant moment I had yesterday at the airport on my way home. My American airlines app had a glitch and I had to go up to the ticket counter and get some help from an agent to get printed boarding passes; and she eyed me in a way that I thought was suspicious. Then she said: “I thought it was you. I cannot thank you enough what you and President Trump have done.” After I got my boarding presses, she said “do not forget the little people, please help us” and I promised her I would. And the only way I can do that now is with this podcast and substack and shine a bright light on why we need Trump and Trumpism back in the White House.

Now, back to the main thread.

Regrettably, far too many financial advisors are more like salesmen of whatever mutual funds they want to stick you with rather than astute students of the market. I am reminded here of the famous scene in the movie Tin Cup in which a golf pro sits on his butt and mouthes slogans like “keep your head down” while some hapless amateur hacks his way through a bucket of balls.

Analogously, the most operative slogans you will hear from a typical financial advisor goes something like “have some bonds in your portfolio because they are safe,” “do not panic, yes, the market goes down because it always goes back up,” and “buy and hold for the long term.”

Truth be told here, at least some of the time, this can be good advice. But these are not such times. So let me quickly walk you through with the typical advisor will tell you if you bring in a pile of cash to invest in.  Let me know if this sounds familiar.

The portfolio construction will begin with what is called “asset allocation” in which some percentage of your cash will be allocated to stocks and some to bonds. As a rule of thumb, the older you are closer to retirement or in retirement, the higher will be your allocation of bonds on the assumption the bonds are “safe” and you are probably more interested in cash flow than more speculative capital gains.

And here is the key point: The central idea behind this bond-stock allocation is that bond and stock prices typically move in the opposite direction so such asset allocation is supposed to effectively help you hedge market risk.

The hedging mechanism of this so-called balanced portfolio approach is supposed to go like this: If an economy is growing robustly and profits are strong, stock prices will be rising. But in such a strong economy there will be upward pressure on interest rates, and, because interest rates are inversely related to bond prices, bond prices will fall in such an economy. Ergo the hedge.

Of course this works in reverse, or at least is supposed to. If stock prices are falling on recessionary woes, bond prices should be rising as interest rates fall.

So you should see here immediately what is the first thing that can go wrong. For reasons I have explained in previous podcasts, Joe Biden and his merry band of economic idiots have created a virulent “stagflation” – simultaneous inflation and recession – and the rare event of BOTH stock and bond prices falling at the same time.

Stock prices are falling on the recessionary threat and bond prices have been falling on the inflationary threat.

So in such a stagflationary environment, the typical balanced portfolio recommended by your advisor is not hedged or balanced at all. You can lose on both falling stock prices and falling bond prices at the same time; and that exactly what has likely been happening on net to what you thought was a balanced and safe portfolio.

And by the way, next time a financial advisor tells you that bonds are “safe,” you might want to remind him of the bloodbath that occurred in the bond market last year, one of the worst years on record. Nothing safe about that.

Okay. That’s enough economics for one day. I want to offer this up in small doses in this podcast and substack as I know it is complicated and, given the state of the markets, can be painful.

The one thing I would agree with most financial advisors about is that this is not the time to panic. It is, however, the time to up your financial market literacy game and that means rolling your sleeves up and doing some more study of how economies and the financial markets work. In the coming days I will be sending some ways to do that. For now, stay MAGA strong. Peter Navarro. Out.