Happy New Year!

Happy Market Update! 

And Happy New Year! It’s 2025, and for some reason, I like the sound of that Twenty-Twenty-Five. I have no reason for it…but I’m feeling optimistic about it. Yes, there will be struggles and difficulties, but I just feel like what’s going to happen will be for the better. Now, as I type this, there are fires burning in Los Angeles. I know those people don’t feel this way. But I have FL friends who had homes destroyed by hurricanes, and they have found hope. So for a moment, let’s take a moment of silence and pray for those in need…

Thank you. Now, on to the update.

So yes, it’s a new year. I am not a person to make NY resolutions. Hell, I’m southern and I won’t even eat black eyed peas. First of all, yuck. Second, I don’t believe in any mumbo jumbo stuff. Nothing bad will come from me on eating peas (knock on wood). See what I did there? I did, however, roll into 2025 with my attitude in check. How about you? We can make changes where needed. Need a new job? Go for it! Need to work out more? “Just do it”. Need to eat less sugar and processed foods? Don’t worry…RFK Jr should be helping us all soon. And yes, I am happy for that. It might make me hate more food, but I think the impact of holding some industries accountable is well worth it. Luckily, it’s only a few foods that not many of us eat. (notice no ketchup on the hot dog like the good former Chicago resident that I am)

So, let’s get this party started! Yes, this is a bit longer than usual. Well, a lot has happened since my last newsletter! So chill. Let’s get through this together. Here is something I have complained about for a long time. It’s nicely summed up in this meme: 

Wouldn’t be a new year (or the same year) without talking about the big “I” word. This next one needs no introduction since you all remember the “inflation is transitory” thing.

So I’ll just say…“Ya think?”

That’s pretty aggressive right out the gate. I understand…you probably gave up being stressed as your resolution. Okay, how about this idea? 100% I would play this game. Beer pong is so 2000s. This is the way!

Tim, that was great…but I’m looking at my year to date stock account and things don’t look great yet. Before you run out and fire your financial advisor…have a look at our seasonality chart. This is for volatility of the S&P 500. Yes…it may get ugly here in the first quarter. Higher volatility usually means lower stocks. But it’s temporary. We’ve got a new administration coming soon…so we shall see if that helps or prolongs volatility. Hang in there. This too shall pass.

What do I mean? Well, there are risks (called headwinds) in 2025, as projected by our friends at Apollo. I liked #12…0% for recession. 0%? ZERO? There has to be some small possibility with the unknowns, right? Especially since there is a 10% chance of a fiscal crisis. I’m no math major…but that doesn’t really math considering most of the financial crisis I have enjoyed in my half century.

Tim, stick to what you do know. Okay, fine. Mortgages. I know mortgages pretty well. How’s that working out the past few years? Don’t ask me. How about I tell you with this chart. Look how much it takes from your income to pay the mortgage based on rising rates and home prices. Imagine the number of people that get removed from the buying pool as these go out. That’s not good long term. But it is what it is. 

Okay, what about per state? So I live in the (could be) great state of Colorado! Since the map implies it takes almost half of the income to afford the mortgage in CO. Ohio? 28.7%. Okay, so YOU move to Ohio. That’s a hard pass for me. California? 60.1%. Okay…and you pay taxes too, right? So that’s leaves….let’s see…add 1, subtract 5…carry the 4…nothing. It leaves you nothing. Enjoy trying to eat! There are orange and almond trees…which are probably on RFK Jr’s list of okays (assuming they are not sprayed with pesticides)…so that could help curb the starvation. But wait! 68% for MT??!! They need to sell more cattle! (I shall help buy some).

Our friend, @NOD008 on “X” is still at it. HE didn’t have to take time off from writing this…but he’s better than me. So there. Anyway, this is a recession signal from Walmart. (Remember Apollo says 0% chance.) But when this spiked in 2020 and back in the 2000s, we did in fact have recessions. 

How’s the Fed doing? HA! Okay, the middle of this chart is “0” or the starting point for rate cuts. Each line is a chart of the 10yr yield, which we track heavily, before and after the cut. Look at Sep’24 (when we had our first rate cut…or “0”). We are in no man’s land. Most of the time we are not up and here we are. So if it looks ugly….cool, it feels ugly! But yields are trying to tell us something the Fed won’t. (Inflation never left maybe?)

Lastly, and I’m sorry…according to the Wall Street Journal, Cocoa futures in 2024 were up 178%...even more than Bitcoin. So if your chocolate seems expensive…and continuing to get expensive, well, it is. But "inflation is not real."

10yr: Well, we kept on moving up since our last newsletter. (As expected based on the cup and handle we discussed.) But today it hit damn close to the highs back in April (2 red horizontal lines). Hopefully this is a double top which is bearish…meaning we might be heading back down from here? We shall see.

MBS: (Reminder: down means higher rates) This is a weekly chart for about the past 52 weeks. The good news is that we are not as low on the MBS chart (to the right) today, versus last April. Meaning? While the 10yr is roughly as high…interest rates are not as high. We sure could use a catalyst to move this back up. But I don’t see much help in this chart.

So listen, it’s 2025. If you want, believe that this is a perfect time to reinvent you. I will support any motivator for people to find a reason to be more healthy, work harder, etc. I’ll be honest, patience is a big one I’m working on this year. And yes 0 to 2% would be an improvement. But these charts are telling me I need to dial it in and be ready for something that’s a coming. I don’t know what yet…and I’m not asking. Why? Patience. It shall be revealed when God is ready to show me. But I can feel him pulling…so I’m going. What about you? What are you going to do differently this year so it’s not the same ol’ you? Maybe you’re perfect. Good for you. But I live in a camp that lives in reality…so…yeah. I’m ready to roll up my sleeves and put the work in. Are you?

What does not kill you makes you stronger.

Tim