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Can We Not Trust Anyone Anymore?

Happy Market Update

Last week’s miss was not my fault! Yes, you are getting a rant. This time about transportation.

 

I fly United, almost exclusively. My father told me to find something that works and stick with it. At some point in the early 2000s, I switched from American to United…for reasons that escape me now. If I had to guess, I would figure that since I lived in Chicago, I went with the hub. That makes the most sense and I have always made sense. Well, 85% of the time, probably. Anyways, I’ve built up a lot of miles between that and purchases through the company. Using a credit card has its rewards…and downfalls. But more on that later.

 

I was scheduled to fly out Wednesday for a conference in Ft Myers. Since I live in a United hub in Denver, I had a direct flight. It’s January, so I suspected it would not be a smaller plane. You see, it was negative 25 wind chills the weekend before I was traveling. Well about a week earlier, I had checked on the type of plane I would be flying. To be clear, a week and a half before takeoff, I checked to see what plane. Why you ask? Did you figure it out yet? Here you go:


Yes, that is a picture of the Alaskan Airlines Max 9 that left Portland to have its emergency door sucked off after takeoff. Yes, it was a Max 9 I was flying on. The return flight was a Max 8. That sounded better than the 9, for obvious reasons. Each day I checked and that plane was still attached. (You know where this is going.) Yes, 25.5 hours ahead of departure, flight cancelled.


I won’t bore you with all the details, but I worked in transportation for a decade before I time here in the mortgage/finance world. So I’m familiar with breakdowns, reroutes, etc. You knew damn well, United, that you were taking that plane out of service. Hell, I knew it 10 days sooner than you? Not a chance. Shame on you. Well, I had to book a middle seat (I’m 6’3” and 225 lbs with broad shoulders) stuck between two other men of similar size. I usually take a window for this reason. Had to stop in Houston, layover all night and then fight to get on a plane the next morning. All so I could not miss a very important conference. Struggles, right?

 

Well, it seems these days we are all dealing with some struggle somewhere. Sticking to our labor theme…do we think it’s still going south? Well check out this chart from Goldman Sachs. Basically the only positive is the nonfarm payrolls and the majority of those are 2nd jobs to keep on living the highlife…or just to get by. I just don’t see how this charts thinks the nonfarm payroll line won’t head towards the others based on the recent past. The past predicts the future.


Here is more on that credit card downfall thing. Wow! I only got the top 41 (thank you, @NOD). No Colorado on here. Killing it! Oregon…um…maybe slow it down a bit. You are making New Jersey look good.


Still not sold? Want to know what the future of inflation looks like? How about the cost of transportation? Don’t believe the naysayers out there who think corporations should not pass on costs to the consumer. That’s not how companies stay in business while affording you pay raises. (Somebody let California know.)


This is my main concern. From the Fed of St Louis, they are suggesting that distress is growing in auto and credit card debt last seen in the “Great Recession”. Mortgages are behind that trend due to the enormous refinance boom with rates into the 3s and 2s during 2020 and 2021.


But for the new homeowner’s, it’s a different story. Look at these increases in payment to income ratio. Yes, incomes are not keeping up. But as you grow the income, things cost more. It’s a circle that does close eventually regardless of what “they” tell you. If you pay people $15 an hour to shake a fry basket, fries are going to cost more. Then you have to pay people more to buy the fries, but then those salaries go up causing the fries to get more expensive. This is why a loaf of bread does not cost the same now as it did in 1955. That’s inflation and it cannot be stopped over time. But huge increases in a short period of time will crush a sector of the population, in my humble opinion.


It’s not all bad. Here are a couple of “Tim’s not a straight up bear”. First, when rate cuts begin, we typically see yields fall. That would mean lower rates on your credit cards and lines of credit (due specifically to the rate cut) but also the long term rates like mortgages. So maybe we can take a cash out refinance and pay off the 20+% credit card debt with a better than expected mortgage soon:


And this from Ryan Detrick, this shows that when new ATH (all time highs) happen in the S&P, the future usually looks promising for our 401ks and stock accounts. Giddy up!


What’s creating this all time high? Obviously you are living under a rock. It’s Tech!



10yr: Today, I am just zooming in on the last 3 months. You can see we made a nice move down, and then bottomed just after Christmas. Then we have been mainly moving up from there. We are currently sitting at an unhealthy (for the mortgage business) 4.132% as I type this. My concern is that we may see the move go to the top of the vertical yellow line I drew. That would put us somewhere near 4.41%. Yuck. I really liked seeing a 3 handle on the 10yr. If you are buying a home, get locked in. But there is a glimmer of hope on here. Inside my circle, the red line (a downward moving 50 day moving average) is about to cross a mustard yellow line (an upward moving 200 day moving average). This is known as a death cross. While that sounds bad, it is. It would be bad for yields…which should be good for mortgage prices. Down here means lower rates. So let’s see how this begins to play out over the next several weeks.


MBS: Up means lower rates. I don’t like this curve. This to me needs to find some ground to stand on. That purple line is the 200 day moving average. Hopefully it will be something strong.


Bottom line, there are a lot of questions…like my plane. Was it going to be checked our before my flight and that’s why it was still on there? Or are they living day to day with the planes? Yikes, first of all. (Sorry JB) Some things are not meant to be played with. The window on a plane 36,000’ in the air…and not our financial livelihoods. As always, keep watching what’s going on…and don’t believe me…and especially the talking heads. Do your own research…understand where your finances are. In the mortgage world we see a lot of people stick their heads in the sand. Then when they want something, too bad. Maybe that’s what the elites want…so we continue to allow them to be seen as elites. Yeah…over my dead body.

 

What doesn’t kill you only makes you stronger.

Tim

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