Happy Market Update! |
We are now well into the last month of the year. Meaning? Time to stick our heads in the sand until Jan, right?! Well…not so much. I have been in sales most of my life, and the one thing my coaches have taught me is to push through while the competition sticks their head in the sand. It can be tough…and yes, having Christmas and New Year’s on a Wednesday pretty much ruins work for two straight weeks. This is pretty much how younger Tim envisioned life at this point: |
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And yeah, that soda would be a glass of 2007 Lokoya Mt Veeder (with my pizza…damn straight!) But let’s be honest…I’d be carsick just from sitting in the back while someone else drove. I do like my NY style pizza though. Anyway, like we said in the old days…”I ain’t going out like that.” Nope…time to keep pushing through. One of the joys of owning a business is the transparency…it either brings in revenue or it doesn’t. We work with a lot of real estate agents in our mortgage industry, and each one of them is a small business themselves…even the W2 loan officers, for that matter. For nearly 3 decades, at least 50% of my income has been driven on commission…so me…and for the past 2 decades, it’s been 100%. So a few years back I decided to supplement with my trading activity because I have a screw loose. I’ll admit it. |
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This profession also doesn’t get much time off unless you’ve liquidated all your positions for the (potential) Santa Claus rally at the end of the year…which would be ridiculous. So I am buckling in for the ride…you should do the same. Speaking of buckling up…you are going to want to do that now for what’s to come….now:
First up…sad news. I’ve been talking about how the credit bureaus sell your information BUT Congress was working to get that stopped. Well, they stopped. Are you familiar with what pork barrel is? It’s the little requests from specific members of Congress that add to a bill that needs to get passed. For example, last decade, there was an ear mark for 3/4s of a million dollars to a university in Montana to see if sheep could be a weed control. These things might get added so that a politician will vote for a larger bill that they may otherwise not vote for. Got that? Okay…so this trigger bill was stripped out…meaning this “pork barrel” was removed for the defense bill. Why? My guess is that the lobbyists for the trigger leads have a lot of money to spend in Congress. This way you and me can continue to get bombarded by calls, texts, etc. Yes…this straight up irritates the hell out of me (that was hard for me to say nicely). |
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Why is this important? Take a look at this chart. With the increase in home equity lines of credit comes increases in credit pulls…this triggers those leads. So if you wanted to get a HELOC, you could not avoid that onslaught of calls and texts. Anyway, I thought this chart was telling. The majority of first mortgages in the country are below 5% (even 4%!) so people are less likely to add into a cash out refinance. This increase in HELOCs is also telling for how people are consolidating some of that massive debt…like the record credit card debt, for example. We watch this closely because large HELOCs were used prior to the housing collapse in 2008. |
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But hey…no need to worry about that if you’ve got your money in stocks! 401ks or IRAs anyone? This chart is promising…so far, the S&P 500 has been the strongest in a hundred years. Hopefully your 401k administrator had only that index! (We know they didn’t…they diversify), but hopefully you are able to use this year to your retirement advantage some time in the future. (See I don’t always put just bad news in my newsletters.) |
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But I do like to follow it up with a warning…so you can’t say, Tim said move all my funds to one index! We are nearing levels in the S&P 500 that should warrant a careful watch of your money. The last time we had 3 years with 20% gains in a row….burst. Just watch carefully. |
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There are some headwinds out there still. For example, inflation. The market seems to want the Fed to lower rates…and right now the Chicago Mercantile Exchange (CME) is forecasting a 99% chance they lower 25 basis points next week (Wednesday the 18th at noon Mountain Time). But inflation is moving up again…which is not what the Fed will want to see. On the right of this chart…the past three “bars” show us moving back up, having NEVER reached the 2% target set by the Fed before they gave up on it. Maybe they gave up on it because they knew we would never hit it? Maybe. Maybe not. I’m just a lowly loan officer…what do I know? |
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Or maybe they think things are getting worse in the economy…even though they don’t say that part out loud. I borrowed this next one from our friend NOD (X handle: @NOD008). So far this year, through November, corporate bankruptcies are at their highest levels since the Great Financial Crisis. Probably nothing to see here, right? We still have December to record, and we only need 5 to be the highest since 2010. I would be willing to place a bet on that happening. |
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Not convinced of those headwinds? How about this map. This is a map Russia published a few weeks back showing us how long it would take for their missiles to reach capitols of NATO countries. Why show this? This should be a threat to the rising yields of the 10yr bond. So far not much of an impact on the yield. But if a missile hits one of these cities…yikes… |
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10yr: This is our daily chart of the 10yr from June to now…moving down means lower rates. You can see my downward arrow…as we are in a downtrend…but near the top of it. My concern is the up arrow. This past Friday, the 50 day moving average (green) crosses above the 200 day moving average (yellow). That is referred to as a Golden Cross and it is bullish…meaning it forecasts yields moving higher (at least for the short term) and that means higher rates. Ugh. I’m hoping this is short lived…but this I will not bet against. |
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MBS: Reminder, up means down here. So we want MBSs to move up. Again, I see a large range…moving up…but slightly. Short term looks bearish (bad for rates). If you look over to the right…you can see candlesticks (the vertical lines represent one candlestick per day) not being able to get above that green line. That is the 100 day moving average and it is working as a resistance area for now. Bummer for rates, at least short term. |
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Look, it’s important to take some time and look back. I get that. In fact, in trading, AJ Monte (my coach) always says look to the left to forecast what’s coming on the right (charts move from left to right like we read). So have a look back on the year (looking to the left)…but have a plan ready for Jan 1…which you cannot do on Jan 6 (looking to the right). Part of the reason I write these newsletters is for me as well as you. Yes, I want people to be informed on what is actually going on…but it helps me to be a better prepper for what’s coming. So take some time to review your year…but don’t quit on the year. We still have 3 weeks to go. (P.S. if you are shopping for Xmas, you have less than 2 weeks now). You’ll find me in the office learning my new profession while cultivating and working on my old profession. And yeah, I might even do it with a glass…no…bottle of that Lokoya.
What does not kill you makes you stronger. |
Tim |
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