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Information is Power

Happy Market Update!

Football season is nearing an end. We are just 10 days or so away from the 2023 year ending (for NFL). And yes, Jackson is beginning his depression. The good news? Spring flag football!

 

While we were watching the NFC Game, he asked who the girls in the background were, and I said those are cheerleaders. Dad, what’s a cheerleader? So I explained what their sport is and how it pertains to the game he loves. I said, what do you think? He said, “Naw. I just want to play football. I don’t want to be around that.” Good boy (he’s 5). Stay away from those girls! Sports and education. I’m sure that’s all he will ever want to participate in. Whew! If you know this movie, we can be friends.


But Sunday was a Dad and son day, which I don’t get a lot…and I loved it…which he doesn’t get a lot. We struggle to understand our roles sometimes. Yes, I’m Dad, but my Dad was a Nazi. At least, that’s how I remember him. And I don’t want that from Jackson…but you also can’t just eat ice cream for every meal, damn it! But we hung out buying soap and coffee (I’m living the dream) and settled in for football AFC and NFC games. Can I just tell you that this kid sits upside down to watch tv? What the hell is that about? Stop moving! Okay, Tim…breathe. “Hey Jackson, is it easier watching the game upside down?” Jackson, “Yes”. So…this is how it’s going to be.


It’s been challenging and fun to watch him grow from his sucking on a pacifier to explaining to me which direction New Mexico is (which warms my geography loving heart). He’s got my natural direction…and I look forward to when the EMP goes off, eliminating the phones, and he can still get to Santa Fe to view some art!

 

It’s been a busy week around too! We had Case Shiller home value numbers, a Fed meeting, ADP #s, UPS jobs, and tomorrow…Fed job numbers. Too much for this email (even as long as I make them already), but I wanted to start with a follow up on inflation.

 

Last week I had a chart about the cost of containers increasing. It is my belief that this will create future inflation. Supply and demand that creates more cost gets passed down regardless of what politicians will tell you. But that’s not the only problem. I am starting to see pictures of racks at Costco’s missing pallets. Look at the traffic in the shipping canals.

 

This first one is the Suez Canal.


This second one is the Panama Canal:


This last one is Bloomberg agreeing with me on the “could” boost goods inflation. And with less shipping, that means that goods might get scarce (further pushing inflation higher). This does not look good.


So what could help? Relief from “Higher for Longer” would be a start, Feds. This chart comes from Eric Rosel at MorganRosel Wealth Management (https://morganrosel.com/). This chart is looking back 20 years. Each time the blue line (Taylor Rule) starts to move down, the Fed follows. Will this be the third time is a charm? The Fed met yesterday and did not move rates, again (higher for longer). His guidance was that really moved the markets yesterday when he basically said, he sees no downward movement in the Fed Funds Rate in March.


This guidance did not make the markets happy. Here is an example from yesterday. This is a one minute chart…see that giant move down around 1245 MST? Yeah, that is him saying that based on this meeting, he didn’t see a rate cut in March. But it helped out bonds…and thus interest rates, but more on that later.


ADP jobs came in light. There was a forecast of 145k job created, but they not only came in low at 107k, they actually revised last months down. This shows cracks in the foundation.


Remember that banking problem from last year that no one talks about anymore? And everything was going to be fine? Tell that to NYCB! That first circle on the left is last years’ concern. Check out that drop this week! Regional bank crisis still looms potentially…uh oh.


UPS: If you didn’t see, UPS gave guidance this week that they plan to layoff 12,000 workers this year. With my background in freight, I can tell you why. Nothing to move. If you don’t have freight because purchases and manufacturing is dropping, trucking sees it first. This is not healthy for the economy. But this also comes after they made a labor agreement last summer increasing pay. That does not compute for me. See the Wall Street Journal for more information:


Want some good news? Can do! This coming from Ryan Detrick’s twitter account. This shows that when Fed cuts happen at all time highs, the market typically likes it. So we might see a correction this year, but if the Fed cuts, then that correction might be short lived. Might be. Also, might not be. Clear as mud!



10yr: This chart looks favorable for now. The 10yr has reversed out (moving down is good for rates). Last week, the 50 day moving average crossed the 200 day moving average. That is what we call a death cross. That is bearish. It looks like we got help from that…and then the Fed helped. The yellow horizontal line the candlestick is sitting on is a big support line. If we can get below it like in December, and then stay below it, we might have a run to lower rates.


MBS: Remember, higher is lower rates. As you can see, the 10yr is moving down faster than MBS is moving up. So rates don’t directly follow the yields. The yields give direction. But there are good signs here as we are above all the moving averages (colored lines). We just need to keep pushing. Come on, MBS!


Jackson loves sports…and I love watching him learn. Education is the key in my world…which is continuously changing. Good or bad, his Dad is going to push enough information (and then some) to make sure he will be able to protect himself from DC….well, anything. But we all know DC is a huge problem…regardless of who is in charge. And yes, my kid knows already. You should educate yourself too. Kudos for reading this far…you clearly want to know more. Information is power. Yes, it’s going to rub some people the wrong way, but if it’s correct, then stand your ground. That’s why I’ve written this for almost 4 years now. No, I don’t always know what I’m going to write, and sometimes I have all the charts in by Monday am. Stay here for updates. If you’ve got something, I’m all ears! I love to learn.

 

What doesn’t kill you only makes you stronger.

Tim

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