Happy Market Update!
This week is our last Fed week of the year. It’s an exciting time around here at Bear Mortgage Inc. (I have to put in the “inc.” for compliance purposes). Predictions are for another pause…maybe they should just go ahead and say they are finished. That would make the markets move up and yields hopefully move down. In my opinion, the stock market is moving up because they think the Fed will need to cut sooner than later even though the Fed has said “Higher rates for longer”. Why is this important? Because these same stock market people say don’t fight the fed…and that is exactly what they seem to be doing. Case in point. This chart is called a dot plot map. It basically shows projections of where the Fed might have their fed funds rate in the next few years…or so. Hang with me here for this part. The Fed Funds Rate currently sits at 525-550.
This next chart, also from the CME Group, shows that more than 75% of the probabilities are shooting for a lower Fed Funds Rate than it is today.
Bloomberg reported that UBS thinks there will be “deep rate cuts” in 2024. Why? That would mean they see something on the horizon that is ugly. Deep is not “higher for longer” and is not slowly backing off either. So what issues could be unfolding? I’m glad you asked.
How is Christmas looking for retailers? This chart shows that year over year, spending on holiday items was down the week ending Dec 2. Why is this important? That was the “Cyber Monday” week. I’m curious to see how this continues to unfold throughout the month.
And layoffs continue. Here is an article from The Wall Street Journal. I don’t care who you are…everyone can read into this. Maybe all the kids are just playing in the Meta World and this isn’t a big deal. Know what would be a big deal? Having kids playing in the Meta world.
This backs up why a company may want to layoff people. This chart is from Variant Productions and shows a sharp and dramatic increase in Chapter 11 Bankruptcies. Chapter 11 is for businesses. We are back to levels last seen in 2010-2011…during what most of us would consider still part of the Great Recession (or at least the great “this blows” since GDP was increasing at this point in our history, thus making it not a recession anymore).
Here is another view from Bank Credit showing it contracting for the first time since the Financial Crisis. Oh…you will also notice it doesn’t happen any other time as far back as my birth year…which was just before we entered the last major inflationary time in our recent history.
This was just on tv:
We are broke!!! That’s it. That’s my comment. No. Change my mind. Secure OUR border too, please. You know which one…
How do I know we are broke? “See Tim’s previous newsletters” has entered the chat. Hold on…they could be new. Here ya go. We don’t bring in anywhere near enough to pay off debt. And the Federal Debt is 122% of GDP. As Inigo Montoya says in The Princess Bride, “Let me explain. No, there is too much. Let me sum it up.” If you spend more than you make…you will eventually be upside down. Here the government has made a business out of this. Why should anyone require you to pay your bills if leadership doesn’t pay theirs? And it’s not their money…so they are less likely to NOT spend it. This, my friends, is how empires eventually fall. I would say that DC is a swamp…but that would be insulting to people I grew up with in East Texas and West Louisiana. Remember boys and girls, math doesn’t lie.
Good news? Yes. I have some. This chart is excellent, especially when compared to the last financial crisis. In my opinion, a recession or slow down should not impact our values like it did form 07-09. The three states with “very high” concentration? I’m guessing this has a lot to do with USDA loans that allow for 0% down on farm land…or at least, rural. So they close upside down already. You notice this in a lot of that states that farm our food. So if you are drowning in debt, but have equity in your home…use it to roll in the debt and make yourself manage your day to day better. There is nothing like waking up and not worrying about the phone ringing for the creditor on a 25% APR credit card. We can help. Want to downsize? Excellent. We can help with that too…and you may have a lot of equity to move over.
10yr: Last week I was worried about the area in the bottom portion of the circle spiking up…and it did just that. This just means that technical analysis works. The blue line coming down is the 20 day moving average and is considered resistance…which it appears to be doing…resisting the yield from rising. We get the Fed answer Wednesday, so hopefully that helps continue to move the yields down.
MBS: Likewise, this chart is promising. We are keeping our candlesticks above the purple line which is the 200 day moving average. The longer we stay here, the more it becomes a base to move up (theoretically). Up is lower rates…so let’s hope this is securing a base for a new push upward.