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$3 for a bite of cake?

Happy Market Update! 

 

Happy Weekly Update!

I hope you have enjoyed this shorter week. A 3 day weekend is nice, but let’s not forget, specifically, why we have this one at the end of May. This is to honor those who have fallen during the course of fighting for this country. I am a Patriot through and through. I was born in Texas and of southern decent…a long line of southern. Pride in where we are from is ingrained in us from an early age. I’m doing that to my son…and no, I don’t tell him about a Colorado “native” thing yet. I tell him he has Texas blood running through him. It’s a Texas thing. But more importantly, it’s about the USA. 



At a young age I was told we were and are the greatest country in the world. As I have grown older, I’ve realized we have our problems. And it does seem like things get tougher each week I write these newsletters. But we have to remain strong in the face of adversity. I have not been to every country in the world, so I cannot say if we are the greatest today. My gut tells me we’ve got some work to do. I’m up for the challenge. What about you? Are you prepared to work on putting this country back together? What if you have to put it together with people you don’t agree with? Newsflash. We have always had differences of opinion in this country…as far back as to the signing of the Declaration of Independence. It’s healthy to debate. It’s going to be a tough 5 months leading up to our Presidential election. And no, I am not going to comment here on yesterday’s big court finding. What I am going to do is remind everyone that we need to be civil and do the right thing to heal this country. I don’t think that’s been done the past 3 years in the legislative (held by different parties mind you) or executive branches. There. That’s it for political commentary.



Politics isn’t our only issue here keeping us from confirming, without a doubt, that we are the greatest country in the world. Economically we are seeing some cracks in the foundation. I’ve been warning these were coming. How bad and for how long is up for debate. But let’s start with some things we cannot argue with…math. Even Yahoo Finance agrees with me now.



There is a lot of red on their chart. Go check it out. It moves on their site. But basically as of 2021, the number of distressed zip codes was mobbing up. That was 2.5 years ago…before inflation began crippling our wallets. Imagine what this will look like for 2024 in 2 years? Yikes.



It’s not just based on zip codes. Have a look at this article from MarketWatch. This is a letter written by a Boomer who can no longer afford his home. Shocking: Social Security isn’t going to help you after all. I’ll take the money that I’ve paid in to it…but you’d better get your finances in order. Hard these days with inflation, I know. But you gotta try. This poor fellow is talking about living under a bridge. We see those tents around big cities…and they don’t pay property tax. HHmmm…this may be the wave of the future. Boomers, if you are concerned about this, or Gen X/Millennials, call us about HECMs (the new and improved reverse mortgage). We can help you get money out of your home to add to the social security. 



So…Boomers think they have it bad? What about the Millennials? They have a right to be pissed too. I mentioned math earlier. I love it. There is no arguing…there is only right and wrong. According to Clever Real Estate, Boomers median income was 28% of their median home price. Millennials? 16%. 16%!! Guys, maybe we should give the Millennials a break on the “they just don’t get it.” Imagine what it’s like for those poor Gen Zs coming up. This is eye-opening to me. P.S. It’s not just the median price…taxes and insurance are skyrocketing. I’ve always been an advocate for homeownership. I have always and will always believe this is most people’s access to retirement over time. Home Equity and Compounding Appreciation are an amazing thing. But damn…it’s getting tougher for more people to take advantage. Dropping rate or dropping values are the only real solution. Which would you prefer?



What about food? X account @interesting_aIL posted this list of restaurants that are closing this year. It is an extensive number of establishments you have heard about. Pizza Huts, Old Country Buffet, IHOPs, Some Buffalo Wild Wings…and Red Lobster to name a few. Check it out. The world is about to look very different for a lot of us.

 

https://twitter.com/interesting_aIl/status/1794289607506296979

 

Some comments in the above X feed mention they were closed because the land is worth more than the business sitting on it. Well, that’s probably true. But maybe that’s because the business is too expensive and not run correctly? For example, check out this list of Starbucks increases in prices. Maybe you don’t eat here…fine. But I want to point out that the “Cake Pop” increased 97%. Have you even seen one of these? It’s a tiny piece of cake. $3. Why even sell it? Because knuckleheads are willing to spend $3 for a tiny piece of cake. IF you are one of these knuckleheads, apologies for the name calling. But…come on. No wonder debt is skyrocketing.



And hey, there is a chance that cost is not done going up. This chart comes from Amy Nixon (on X also) and show year over year inflation from 2014 until today (in red) and the one that played out from 1966-1982. If we follow suit…the worst is still ahead of us. Let that sink in. It will make the summer 2022 seem tame. So hopefully our Fed Leaders are paying attention to this. These charts fascinate me. How does the saying go: History repeats itself? Also, if this chart matches…that carries us to 2030 and beyond. Ugh.



But it’s not all bad. From Apollo, this chart tells us that the economy is not slowing down (that’s bad if you want the Fed to lower rates). CapEx is capital spending by a company. If their stocks go up, they have more access to funds to invest…that can create jobs, a need for goods, etc. 





10yr: This is our 10yr from late Dec through today. You can clearly see the uptrend in the yield creating an uptrend in long term interest rates. After some movement down early May, we rebounded up the last half. It’s serious indecision. Overall, I think the Bond market is telling us rates are going to stay up. But if we get economic info to counter that…it will help move us back down. (see last chart below)



MBS: You can see the same movement in early May, this time up (because MBS up means lower rates). And you can see the up, down, up…indecision. 



So why the help today? Well, the PCE inflation number month over month improved (still moving up, mind you). But that was not the one that wow’d me. Check out this Chicago PMI chart. That’s the manufacturing index. This chart goes back to 2005. You can see that we were this low during the pandemic (expected) and during the Great Recession. 



I’m sorry, how are we not headed for recession? This time is different, right? Wrong. Again, I am up for a spirited debate. Tell me why you think this is not going to end ugly. I promise to listen. I like to hear both sides. I just can’t hear anything coming from the other side’s direction. I’m listening. But I won’t be tomorrow. Tomorrow, Jackson is playing for the Spring Football Championship. And then headed straight for his first real swim meet. I plan on making sure this kid is healthy…healthier than any other Lindsey before him. He likes it more than me. I want to sit and drink a beer. Apparently, that’s frowned upon at whatever pool is he playing at. Damn it, it’s summer! Which makes it hard for me to sneak in cans of beer in the coat. That won’t look suspicious. Who’s around to hand me a beer over the fence? You can be my friend for life.

 

What doesn’t kill you, makes you stronger. 

Tim


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