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The Charts Don't Lie

Happy Market Update!

As most of you know, my birthday was in July. So, I am officially on the clock to turn 50. Only 49 weeks to go. Am I scared? No. I’m tough. I’m strong. I will not…..ouch! Hold on a second. Yeah, I threw my back out. Well played, Universe. My back actually did stiffen up last week…like right on cue. What did I do? I drove around to open houses on a Saturday. Yep. That’s it. I guess moving in and out of the truck did it? But it got really bad last Thursday. I woke up and, long story short, crawled to the tub where I had Epsom salts ready to go. Now, you are probably thinking, that doesn’t sound so bad. But here’s what you don’t know about me. I hate baths. Not as much as I hate mayo (which as far as I am concerned was made by the devil), but it’s probably top 20. Why? What do you mean why? Who likes laying around in their own filth? You have to get out and get in the shower. What’s the point of that?

Well once again the Universe was very happy to make me not hate the calm from my back. Hold on. Chill out. No, I will not be taking regular baths now. I still don’t like the idea of floating in my own filth. You are all asking yourself, did Tim start working in the oil fields? Stop it. But this will never be me:

But I guess my filth can wash off…unlike our DC Swamp! And hey, China fits right in there too. Let’s start with China.

You may remember last year when China’s EverGrande was causing a bunch of disturbance for their payments to creditors. Well, now we have Country Garden, which I understand is 3-4 times the size of EverGrande, causing the new disturbance in the force. Check out how their price of their US dollar bonds has tanked. This is more evidence that the World economy is getting worse. According to the WSJ, Country Garden Holdings, “estimated the red ink could be as much as the equivalent of $7.6B (billion with a B) for the first half of 2023. How is China doing with trying to protect itself from the chaos that is clearly going on economically, internally?

It gets worse for China…in terms of the USA. The title of this article from the WSJ is all about charts. You damn well know I dropped everything I was doing to go straight to this article. My mouth started salivating just now thinking about all the charts. I’ll only show a few for you. First one here, imports to us from China taking a dive from the Trump years…and carrying through the pandemic and Brandon, oops…Biden, administration.

How about this next one. Look at China and Mexico crossing...and now leading the way. How much tequila are we buying?? If you feel bad for me, and want to send me a “hope you back gets well” gift…Casamigos reposado will do nicely…and, since not everything is about me, it would help Mexico continue its upward trend.

Last note about this. If you were China…and you wanted to fight a war over Taiwan, would you find new trade partners and make sure you didn’t rely on your enemy to buy goods? I would think so.

What about closer to home? How about this terrifying chart for the money supply. This is the lowest it’s ever been. What does that mean? M2 dropping means inflation is likely to fall. Woohoo! But the quickness of the fall may be the issue here. It will also mean growth is likely to fall. I guess you take the good with the bad? Congrats to those of you hearing the theme song to The Facts of Life in your head. No apologies from me. You get to see in my head for a second.

Meanwhile, our Fed Funds Target Rate is at it’s highest since Feb 2001. Listen to this crap. We have an LO on our team who was born after this date. My back just spasmed again. This chart goes back to almost the end of high school for me. For my Boomers out there…tell them about the early 80s when you can. Perspective is an important talent.

How does this impact most of us? Aside from your credit card and line of credit rates? How about long term rates for those souls out shopping. Average rate last week was 7.68%. This week? The 10yr has continued to move up…so this is moving higher. Highest rates since mid-2000. Remember Y2K? Man did we stress about nothing. We may say the same about Covid someday. I digress.

Bad news for home affordability. I assure you, we see it here at Bear Mortgage every day. Cracks in the foundation of the economy. I’m planting my flag. Why? This along with credit card debt and rates are record highs, student loans restarting, and car payments that we see on credit checks? Yikes.

Who is chart exhausted yet? I can go on and on and on and on and on…but only one more before our 10yr and MBS. This is a little behind (from 2022) but things have not greatly improved since. This chart shows that our inversion level was the same as in 1928. What happened in 1929? Anyone? Buehler? I’m not saying the Great Depression Part 2 is coming. I’m also not saying it isn’t.

10yr: This is a one year chart because we are back above the yellow horizontal line (my resistance line turned to support at around 4.106%). Now we are looking at the orange horizontal line of 4.335% as the resistance line. If it breaks and stays above, that becomes support and I’ll need to go back into the 2000s decade to find the next level. What does that mean? Higher rates…which deserves a frown face. The circle area is what I’m watching. I have my Jerome Powell voodoo doll ready to go. Maybe there is a Tim one out there and that’s why my back was hurting. Son of a bi…

MBS: This is a one year chart because it shows the low from October which is considered our support level. We move below that, and yikes. I’m not even sure my charts for MBS go back enough. But you know me, I’ll find one. But damn it, I don’t want to have to do that! (Down MBS = Higher Rates). Stop going down! Don’t understand this chart? Frown face attached.

I feel like I need another bath…no…shower!..after seeing all these charts. I’m sorry. Look, go pour yourself a glass of wine, get the bubbles going in the bathtub. I won’t judge after this email. But, I’m sure everything will be fine. Soft landing? Here we come! Not.

What doesn’t kill you, makes you stronger.

Tim Lindsey

President/Sr. Loan Officer

Bear Mortgage Inc.

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