Program:  Cavuto Coast to Coast
Date:  2/16/202
Station:  Fox Business News
Time:  12:00PM

DAVID ASMAN: Well, a tired of paying higher prices for groceries, don’t expect your weekly bill to get any cheaper thanks to what’s happening with Russia. John Catsimatidis weighing in earlier this morning on this subject. Listen.

JOHN CASTSIMATIDIS: The prices you see on your shelves and the prices you see at the gas tank right now are the prices when oil was seventy five dollars a barrel. It has not reflected when President Putin has started to pot. He stirred the pot and pushed the price up to 93, 94 95. You’re going to see massive increases in late February and early March. And like I said, to friends, fasten your seatbelt. That’s going to happen because this is part of an international threat.

ASMAN: He not only knows about grocery markets, he also knows about the oil business. He’s in that as well. Reaction now from Kingsview Asset Management CIO Scott Martin and Chavez CEO Rob Luna. Good to see you both, gentlemen. Thank you for being here, Scott. Where do you see inflation going from here?

SCOTT MARTIN: Higher, David, but at a slowing rate, and that’s something to keep in mind is that I think a lot of the initial shock from inflation is probably past. That doesn’t mean it’s not going higher, but it is slowing at an increasing rate. I guess if that makes any sense, the rate is slowing, in fact, as of the increase. But here’s the one thing that is concerning. I mean, we heard from Brian Deese earlier in the hour here, and it’s just, you know, Joe Biden doesn’t even know how much a pound of ground beef costs. Obviously, he still may not know. I mean, he does talk to friends to obviously figure that out. But with regards to some of the support that Biden is receiving from his economic advisers, I don’t think they’re helping him out very much. And it’s not just ground beef, it’s sugar, it’s grains, it’s wheat. It’s all the things that go into the processing of food. And we also have transportation issues, too, among all the other things that we’re concerned about. So the government is way behind on this. It’s not a fed problem, it’s a policy problem, and it’s probably going to get worse before it gets.

ASMAN: Before I go to Rob, Scott, I want to. I didn’t get a specific answer. I just want to focus in on how much it might go up. You say it’s still going up. We had the wholesale prices up almost 10 percent, nine point seven percent. Wholesale prices eventually reached the retail level and US consumers. Do you think we’re going to go to double digits?

MARTIN: Yeah, we will. But what will happen, David, is we’ll get to double digits and things will start piling up because let’s face it, some of the rates of inflation that we’ve seen up until now, especially in the early months when it really started popping, were unsustainable. So it will get better, but it will get worse before it gets better.

ASMAN: Double digits. We haven’t seen that a long time. Rob, a lot of investors are looking at the stock market, even though it’s down today. Right now, they’re thinking their trades to be made, and I’m sure there are trades. But Warren Buffett, back in the days of high inflation 1977, said the following If we can put that Warren Buffett quote up if you feel you can dance in and out of securities in a way that defeats the inflation tax, I’d like to be your broker, but not your partner. Did he get it right and is does that still hold true?

ROB LUNA: Yeah, I think so. Look, inflation hurts everything, right? You’re seeing rising labor costs. I mean, you know, Scotty’s Captain Crunch diets really in a lot of trouble right here. If you look at corn prices, what’s going on? Things are not going to get any better any time soon. If you take a look at what’s going on to Scotty’s point, though, look, a lot of people are blaming the Fed. We heard that before the Biden administration has done just about everything wrong to ignite this bubble that we’re seeing right now, starting with the nomination of Powell. Traditionally, that’s done June July. He waited all the way to November. So the Fed really didn’t want to move ahead of that. We saw that he’s out there yelling at reporters now because the fact that he got it wrong, they’ve done everything incorrectly, but you’re already starting to see cracks. David, if you look at the higher end of the high income, sorry, home prices, those things are starting to come down. Things are slowing down across the board. The supply chain will reopen. So to Scotty’s point. Yes, it’s going to be transitory, but that’s already after the, you know, the cattle is out of

ASMAN: I want to stick with. I just want to say, I just want to push back a little bit on Iran because they did wait too long. Isn’t it fair to say that the Fed waited, too? Sometimes there’s a momentum that has built up with inflation that becomes almost unstoppable. I’ve seen it happen not only here in the United States, but all over the world. I’ve seen it happen in dozens of countries in Latin America and Eastern Europe, et cetera. They they did get behind the curve in terms of raising rates. And now there’s still I mean, let’s face it, they’re still monetizing the debt, they’re still buying treasuries and printing money to do that.

LUNA: Yeah, I completely agree with that. But that being said, I really think that a lot of this would have started in the fourth quarter of last year versus what they’re doing right now. And really, what they’re doing, David, is they’re just following the tape. You know, they’ve already priced in 75 basis points, at least 50 basis points into this market, so they’re well beyond where they need to be. But I think to let the Biden administration off the hook and try to say that there’s not any pressure that’s being put on this spending

ASMAN: Yeah, no. And Scott, obviously that’s the point. Spending money you don’t have is the cause they’re always talking about. Causes the root cause of inflation is spending money you don’t have and therefore printing it, and that causes more inflation, that is the beginning of all this, isn’t it, Scott?

MARTIN: Sure. And we never had it, David. So that goes back many years, even maybe decades. But the reality is there’s also some poisoning. As you guys know, that’s been done to the labor market here with all the government stimulus that came out and basically encouraged people not to work. So, David, they really messed up the growth trajectory of this economy because it’s OK if you borrow debt, like, that’s not a bad thing. But if you’re not going to pay back the debt, that’s something you need to be worried about.

ASMAN: But Rob, here here’s the point that my buddy Art Laffer makes, which is that in the early 80s or late 70s going into early 80s, because because Volcker was actually appointed by Carter in the late 70s, he had to put interest rates above the rate of inflation to get inflation under control. That would mean we would have a rate of of 10 percent or so if we get double digits inflation. Even more than that, I mean, we had interest rates of of over 20 percent in order to get rid of double digit inflation back in the in the early 80s. Are we going to have to go through that again?

LUNA: Yeah, I don’t think so. I mean, it’s a much different economy, obviously. I was pretty young in the 80s, but a much different economy that we were facing then. And look, the whole thing that we’re looking at right now is something brand new. We had COVID, so the complete supply chain was shut down. The type of monetary policy that we’re implementing right now has never been seen before, so we’ve never been in a situation where they’re unwinding their balance sheet at the same time that they’re raising interest rates. And like I said, I don’t think this economy is as hot as most people think. We’re in a situation where the supply chain was constrained spending the administration put tons and tons of money into the consumers. And that’s when you’re dealing with stocks

ASMAN: very quickly because we don’t here we got a jump. But when you’re talking about the economy, you have two separate private sector spending with public sector spending. I’ve never seen public sector sector spending as high as it is now. I mean, that’s the problem, right?

MARTIN: Yeah, especially because of the private sector, which private sector spending has been waffling a little bit here. We’ve seen the retail sales numbers get back and forth. But the reality is you want that private sector, David, to carry the economy, not the public sector, as the government has done or tried to do in the last two years.

ASMAN: Let’s leave on that point. I think we all agree on that one. Good to see you both, Rob. Scott, thank you very much. Well, mixed messages.