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The Math Ain't Mathing

Happy Market Update!

I know over the years I have written about math. Why? Like most of you know…that’s how the aliens got here. Physics, yes. But if you spend enough time in that science, you are going to do math. Look up the equation that makes the apple fall from the tree to bonk someone in the head. Math. Why is the Earth NOT flat? Math. Even music is math. And if we didn’t have music, we would only have talk radio (for the young people that’s what it was before Podcast…which is a fancy way to say talk radio). Anyway, over the weekend the kid Lindsey, Jackson, decided to share something about math. He said, “Daddy, I’m great at math”.

I looked up from my eggs to see he was adding 8+4. “Watch, Daddy…that’s 12.” The kid wasn’t wrong. “Daddy, I’m the best at math. See? 9-3 is 6.” The kid wasn’t wrong again. So, I thought about it for a minute. Could he be the next future Federal Reserve Chair? Or may the next Bankman-Fried (before he got caught money laundering, allegedly)? Or maybe Supreme Leader of the galaxy? I mean after all, math is how the aliens got here, right? I was getting super excited about my kid, the way a parent realizes that their kid may be the smartest ever. So, like the great parent I am, I was ready to challenge him. “Son, that is amazing. What’s 5 x 2?” “That’s 10, daddy.” Now, you are all thinking, wait, I thought Jackson was 4? He is. But he also loves the number 5 and his football number 10 is two 5s. So we’ve been over that. I had that moment like Elf did when he asked the store Santa what song he sang on his birthday to trick him. If you know that face…you know.

Okay kid. “Tell me, Jax, what’s the cosine of an isosceles triangle?” What? He’s not your kid. He’s mine. “What? Daddy, you’re silly.” “No son, that’s math.” But you know what? I don’t know the answer. Hell, I’m not even sure if I asked the question correctly (apologies to my father who has a master in engineering). Trig was a long ass time ago. But, I’m also not trying to run the country. But you know who is? The DC swamp. I’m not going to ask that they calculate any angles. But I would like for them to know the difference between a “+” and a “-“. Too difficult? Cool. How about red and green? Do you know the difference between those? Spoiler alert to my readers: they do not.

Case in point. We’ve been told the banking crisis was short lived and over. Not. So. Fast. Guess what happened in the past week? Nevermind. I’ll just show you. See below? I did not hear about this on any finance network. It’s true I only glance up every now and then from the desk, but shouldn’t this be discussed long enough for that one glance up? I think so.

So as usual, the powers that be either lied to us (not good) or they have no freaking idea what’s going on (not good). Either way, these people take our tax money and literally do nothing to earn it. Ridiculous. For the score keepers, that’s 5. So far.

Why is this and other financial problems so important? Well, as a country we have only been downgraded in our credit worthiness once in our history. Until last night. Yes, downgraded again. Why? Because, and these are my words, Fitch doesn’t think we are a 1st world country anymore.

If you watched The Big Short movie, you might remember that the credit agencies were giving AAA worthiness to mortgage-backed securities when they shouldn’t have been doing so. What does it mean that Fitch is ahead of “it” this time? This should scare the crap out of all of us…well, except for my readers who know I’ve been preparing us all!

Again, why the concern? We’ve gone over credit cards, student loans…what now? How about property taxes? If you live in Colorado where I am, you know our taxes increased dramatically. Well, it turns out that this was not a local event. In fact, the National Mortgage News is reporting that property taxes in two-thirds of the US increased last year. Let that sink in. Highest credit card debt on record. Highest average interest rates on those credit cards. Student loans kicking in for a lot of people. And now…mortgage payments about to go up from escrow recalculations or, like me, just a higher one time payment each year. Mine were dramatic enough that I filed my first ever appeal (still pending at the time of writing this newsletter). Oh and don’t forget those things they don’t include in a lot of inflation numbers…food and fuel. How are any of us saving any money right now?

Good news if we are in stocks, right? Especially Tech. Well, let’s look at this chart. You will notice that the 10yr (followed closely in our mortgage industry) and the Nasdaq 100 move in sync for the most part. This is true if you back a long way, for the most part. But look at the two lines from the beginning of the year. So what gives? Will Tech come down? Or will the 10yr Treasury price increase to catch it? Treasury prices bring lower yields and thus lower interest rates for us all. In this chart, it’s noted that the treasury price is breaking down below the yellow line. So Tech will continue up? This will get corrected…and I’m willing to bet Tech comes down faster and the Treasury price moves up. Why? Because it takes rates a lot longer to move down (interest rates are inverse to the treasury price) than move up.

It’s happening in the S&P too. RSI stands for relative strength. The bottom line here, and with the above chart, is that if things don’t seem to be making sense, well charts (math) agrees with you. As my southern upbringing would say, something just ain’t right here.

You know I like charts that have two things that chase each other. So here’s another one. GDP is gross domestic product and GDI is gross domestic income. What we notice here is that GDI (green) moves first to be followed by GDP (orange). GDI has dropped below that 0 line…and that leads to recession.

The two questions I have are 1) how deep of a recession and 2) why does the Fed lie to us as they now say we won’t have a recession? We are big boys and girls. We can take it AND PREPARE if you just tell us the truth.

Tim, it will be okay. “They” will take care of us. Really? Check out how we are doing with tax receipts in this country. Another chart that says recession coming. By the way, “they” are us who work to pay taxes. Listen, socialism won’t work. We need people striving to do more and better if you want them to pay taxes. Those are for roads, schools, etc and yes, to help people get back on their feet. NOT to keep them off their feet. There I’ve said it. You are not surprised. Someone has to let the new round of commies know it doesn’t work. I’ll start. Hey Commies! It doesn’t work!

10yr: Yep, once again we are pushing up around that 4.10. Today was rough. We hit a high of 4.126%. That’s the highest 10yr yield since Nov 9th of last year. We have moved back below that yellow line of resistance…that now I have to extend further. Ugh. We are locking…and yes, rates are still higher. Rumor is they will move up further…which would bring down the Nasdaq, by the way. That’s not trading advice. Let’s see if I’m right along the way.

MBS: Similar story here. That’s a nice retracement today (far right) off the lows (remember, higher MBS – lower rates). But will it hold…is it making traders and loan officers warm and fuzzy just to kick them when they are just trying to get up? Yes. Haha. Maybe. Lock for protection. The Fed is off the tracks.

When math doesn’t add up, that’s because the equation is not honest. Even kid Lindsey knows this. This will be a sad cry for help, but to our politicians out there, why not act like we are not pawns. I could be a bishop or a knight. But you continue to abuse us for your own can…and now you want to push us off to the WEF (different newsletter some time). Shame on all of you. I’d order more tea to dump in our reservoir, but inflation crushed that. Before you sell us your economic plan, maybe take economics….and this time, pay attention. You really have no idea what you are doing. The bigger problem? You don’t even care that we know it. And that is tyranny. Montesquieu: “There is no greater tyranny than that which is perpetuated under the shield of the law and in the name of justice.” I like this one from Thomas Jefferson: “I have sworn upon the altar of God, eternal hostility against every form of tyranny”.

What doesn’t kill us, makes us stronger.

Tim Lindsey

President/Sr. Loan Officer

Bear Mortgage Inc.

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