Hard Things Build Character

Happy Market Update! 

I’m not gonna lie, this one is chart heavy. Hold on…wait!!! Don’t stop reading just because there are some charts this time. I know some of you are here for my angry sarcasm (thank you!), but I know some of you like to hear about Jackson or read my “letter of the heart” part. I appreciate that as well. So I will start with that…but I implore you, please read on. I do a pretty damn good job explaining what is in the chart, if I do say so myself…which I do.

Anyway, no, football has not started for young Jackson, yet. It’s coming up soon, so I’m hoping to tell you more about his growth from his wins and losses…although as a good Father and a football fan, there damn well better be less of the losing.

I think that losing in sports is healthy. I mean YOUR team losing is good for YOU. I’m not talking about me right now. But I am a person who believes that the rough parts of life are what gives us growth and yes, as all 80s tv taught me, builds character. I know this because the mortgage world has been in recession the past 2 years. The tough will stick through it…and so will Jackson through his losses. But for now, he is almost a full month into Kindergarten. As I’ve probably mentioned before, he only gets 3 recesses (as he likes to share each night). How he deals with only 3, I’ll never know. But knowing that there are not 4? Character building! Probably.

This has played into my life over the years…and still does. I believe that if you stop growing, you die. It’s just something I have noticed in my life. For example, Joe Paterno. If you know the story, there were some terrible abuse allegations brought upon the Penn State football team many years ago. I am not discussing that here at all. I just want to note what happened to Joe Paterno. This man coached Penn State from 1966 until 2011, when he was removed as head coach due to this major internal crime. Again, that’s not my point. He was still coaching at the age of 85, walking up and down the sidelines. 74 days later, he passed from lunch cancer. Now, he may have been headed that way…but I see this as a man who was fine until he had nothing left to grow. Again, not praising him or trying to start a conversation about the abuse under his leadership (clearly I cannot stress this enough). I’m just saying that he literally died after he stopped growing.

My point here is that the struggles we have build character. So don’t be afraid to get up when the going gets tough. And yes, I know who Billy Ocean is…do you?

You probably didn’t know it…but you get up when the going gets tough already even if you don’t know it! Try paying for groceries these days…or just reading my newsletters. Just kidding…these are awesome. So let’s get to some things that will help all of us build character whether we want it or not! Like what? Well…

It’s Jobs Friday, once again! It seems like we crammed a lot of information in this short week, along with last Friday. The first week is usually heavy with reports…and this week did not disappoint us. But let’s start with August 30th.

PCE came out last Friday. This is the Fed’s favorite measure of inflation. This shows it at 0.2% month over month. Much lower than our highs over 0.5% in 21 and 22, but this means it’s still moving up. 

Also from last Friday, the revised, final look at consumer sentiment. I went back to pre-“pandemic” to show you how we felt before 2020…compared to the last four years. Not even close. This is not a political commentary…it just happens to line up with politics. I didn’t do that…the elites did that. My point here is just to say that we are nowhere near as positive as we were…not even close.

As we roll towards our jobs report info, let me share this chart from Apollo that indicates how much employment is from multinational companies based in the US. He breaks it down in writing which I would like to share here: “total nonfarm payrolls in the US (are) 159 million…19% of the employment is in (these) multinational enterprises”. This means that 81% of the jobs in the US are privately owned companies. If I was a presidential candidate, I might be paying attention to that. But those privately held companies don’t have enough cash to get their attention (I know firsthand as a small business owner). 

First up yesterday, ADP. This hits below 100K for the first time since Dec 23, coming in at 99k. Still showing growth in jobs…but shrinking.

BLS survey form this am? Drumroll…please……….142k. This one I like because it also shows revisions. And after that 1MILLION job “correction” for April 23 – March 24, we can see more revisions to the downside. July was revised down from 114k to 89k…and June was revised (again) down by 61k to 118k (that’s a 34% correction). I for one trust the number this morning. (NOT!) Unemployment also ticked DOWN from 4.3 to 4.2. Not sure how that happens with a 114k number…and the participation rate staying flat at 62.7%. Oh, right…government math. Probably using those damn squares or whatever to do math.

We are not getting good reports overall on jobs, as jobs are moving against a healthy economy argument. Charlie Bilello reports that outside of 2020 Covid year, Challenger reports that the US had more job cuts in the month of August since 2009. You might remember that year. 

Our yield curve is telling us a narrative might be changing. Remember we have been watching the longest yield curve inversion since 1929 (I’ve read…my chart only goes back to the 70s). Even if that was wrong, okay, then it’s the longest yield curve inversion in my data…going back almost 50 years. That did end in the past week. Yes! This chart is tiny, because I wanted to encompass the entire inversion. Remember, below that 0 line means that shorter term bond yields paid more than the longer term (so why would anyone buy a long term when they could make MORE money shorter?). That red arrow is us breaking above 0. Why does this matter? Below this chart is the chart for history buffs…

Since the late 80s, every time an inverted yield curve un-inverted, we had a recession. What’s next then? Are you a gambling person? Do you bet with the trend or against it? Yes, someone will bet against a trend and win…but after how many losses? Ooohhh…they don’t bring those up, huh? Exactly. I am not betting against the trend here.

10yr:It’s still early in the day for this chart, but it looks like going up or going down is a battle. (Up here is higher rates.) We shall see how the day plays out.

MBS: Remember, up means lower rates here. That is today’s early candlestick so far. That is one hell of a shadow. It was formed as the job number came out…and retraced immediately. We will have to see how today plays out.

So what is the story today? Tim doesn’t trust the government and their math? No, silly. That’s every day’s story. But you long time readers know this already. Hard things build character…how much character do you have? I have a lot…and yes, it was earned…albeit not always how I wanted to earn it. If harder times are ahead, you will be fine if you plan and push through with grit. But don’t take my word for it…listen to one of the most inspirational speeches of all time… 

What does not kill you makes you stronger. Even you, Tate.

Tim