Labor Day Stinks

Happy Market Update! 

What the hell is labor day? Honestly. Do you know? Do you know the history? It seems like another day to grab a Coors Banquet and grill some meat. Not bad…but we can do that on Saturdays and Sundays too. Then I wondered, is it a day to celebrate college football? I mean, yes, official week one occurs on or around this long weekend. But then, we wouldn’t name it Labor Day. It would be named something like “the best sport day”, right? (I can hear my southern friends chanting “SEC Day”.) But no…that is wrong too. So I researched it online. (I don’t always use “Google” since yes…they hide stuff. Don’t believe me? Use another search engine for something controversial.)

So it looks like we used to have a parade. Do we have those now? Or do we just get discounted shopping? Anyway, according to the Department of Labor (you may remember these folks from the joke of a department they are with recording jobs…or lack thereof [cough…million missed…cough]), this is intended to celebrate the “social and economic achievements of American workers”. First of all, what the hell does social have to do with working? Economics I can see…since we are producing GDP. I don’t think social had anything to do with the beginning of this holiday. That sounds more like something we would say in the 21st century and not the 19th century.

But stopping before I go on a rant about that, for whatever reason we started it…it’s now just a day to give people off. I like my days off, don’t get me wrong. But a day to celebrate not working? That does not sound like labor. I know this newsletter is probably getting a lot of frowns, but whatever. This holiday makes no sense to me. And yes, there may have been some innovation we wanted to celebrate way back in the industrial revolution (that a lot of people complain about these days). See that smoke and smog?

What about this coming Monday? Are you going to celebrate the newest Apple iPhone in the newest color? Or perhaps you want to celebrate the newest clothing line? (Probably not created here.) You think you can get behind NVDA? Do you even know what a semiconductor does? Or how about AI? Hopefully AI will give us 365 days of Labor Day, right? (Doubtful…you will spend every day rebooting and unplugging and re-plugging). But Tim…what about space and our achievements there? You mean like how Boeing and the US government is leaving 2 people in space until February that were supposed to be in space for a week? I hope they don’t like the family holidays later this year. (P.S. Thank you Elon for stepping up to go get them.)

My point here is that this is a dumb holiday. You probably got that. You can tell me otherwise? What am I missing? I’m not trying to be cynical, well, maybe I am. I just don’t get it. Know what else I don’t get? This economy.

One of the things I mentioned to our team and loan officers this morning was a question. Why will the Fed lower rates next month? Below is a chart of the quarterly GDP since 2021. I chose to leave out covid. This past Q2 was updated this morning to reflect the economy. It came in at 3.0. That’s an increase, doubling the Q1 report. If the economy was doing poorly, and we needed to cut rates, wouldn’t this be reflected here as well? Something stinks. More bad info we will find out later was reported wrong? (cough…million jobs…cough) I bring this up because inflation is still not at the “OG” 2%. And jobs? The market didn’t care about that report last week at all. And JaPow does, according to him. Something does not math.

Perhaps it’s because of charts like this? Thanks to our friend, @NOD008 on X, for this one. What are we looking at? Well for starters, the red line is this year. The blue line is the median. Basically, this suggest we are ahead of where we should be for a recession. Does this indicate we are already in the recession? GDP says no. Stock market says no. Fed says…Fed says…Fed…hello, Fed?! Give us some direction.

Here is something they can blame it on as fall rolls in, officially. This is the average seasonality of the VIX…the volatility indicator. When the chart goes up…typically, the S&P 500 goes down. The boxed in area is later in September and October. These are the two months known to be historically rough for your portfolio. I don’t make this up…I just report it to you. 

Our friend NOD enjoys charts as much as I do…maybe more…which is difficult. This next one I stole from him as well. If you have not heard, Warren Buffet is sitting on close to $400B (billion) in cash. He doesn’t feel warm and fuzzy. Well, this chart indicates that insiders at companies who own stocks…are not feeling warm and fuzzy either. We are at the lowest level in a decade…which means we are not seeing executives at companies buying their own stock. That should be enough to keep you out of it too. (not financial advice)

But we have some good news! Like every last Tuesday of the month (unless it’s a holiday), we received the Case Shiller report. This is appreciation +/- of homes in 20 cities. So this is basically an average of the appreciation as a nation. This report is always 2 months behind, so this is for the month of Jun 2024. You can see the massive amounts of appreciation we had coming out of covid. Anyone who shopped for a home then remembers the fight to get the home. Didn’t buy then? Okay, then have a look at your property tax bill? Makes you sick, right? Well, you can thank that appreciation. Property taxes are awful until you realize it’s because you made money on that property (unrealized without selling). Bad looking back, you can see that somewhere around 5% is average. So we are still doing well, annually. Smile. 

Quickly going back to the Labor Day conversation about innovation…The Wall Street Journal reported on Aug 26th that we are working to turn BACK ON a nuclear power plant in Michigan because the Data Centers and AI servers need way more electricity than anticipated. So check this out. The government tells us to use less energy and then they turn on nuclear power because they need to keep data…on you. You watch…they are going to turn all of these plants back on after telling us to stop eating meat. #climatechange (P.S. the government can kiss my ass about not eating meat) By the way, this was shutdown in the 70s. Maybe someone should check it out for spiders.

10yr: We have been moving sideways in the yield. Albeit, near the most recent lows going back a year. But this circled area is probably a possible squeeze which could determine which direction, up or down, we go. It’s important we don’t move back up above into that trend. We need lower rates to drive more buyers out there. Remember, up means higher rates here. 

MBS: Down here means higher rates. Here we see the higher move, but again, a sideways move this month. Need this to consolidate like it’s doing and then make another move to the up to help buyers afford homes. 

So maybe the bonds and mortgage backed securities need a Labor Day. They can grab their beer and chill. Then go ahead and make the move we need…to lower long term interest rates. Even if the economy is doing better than we think it should…it sure doesn’t feel that way. I talk to a lot of people…a lot. And most have the same nervousness. But we keep buying. We keep running that record credit card debt up. How can that be with all of us working? I know some out there are thinking I’m doom and gloom. As I’ve said before, and I’ll say again, just prepare for the worst. If it doesn’t come, great. If it does, then you are ready. In the meantime, my final thought is, get to work!

What does not kill you, makes you stronger.

Tim