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The Past Can't Hurt You, Unless You Let It

Happy Market Update!

This week I wanted to tell a story about something that happened to me personally regarding a past relationship. I wanted to reach out about this because I am a firm believer in removing unhealthy people in my life. I’m guessing someone out there has had this issue or is dealing with it now. I just want everyone to know they are not alone…even if that only reaches one person for now.

In August, I received a message via FB from a friend from when I was 18-20. As a reminder, I am less than a year from 50. Stop making me say that, please. Anyway, he was a close friend at the time. He reached out to me in August to tell me his Dad had passed. He’s may age, so it’s not unheard of that parents begin to move on around this timeline in our life. I struggled with this message because it was not a good time in my life, and a part I left behind on purpose. But because I have a heart (stop laughing…I do), I considered responding to him. But something told me to hold off. Here’s the back story.

When I was a kid, I got into trouble…but never did any drugs. I grew up with Nancy Reagan and “Just say no", the tv show Family Ties, and a very strict upbringing. I was asked to leave at the age of 17 by my mom. Happily, I left for college…that only lasted for about 7 months. I moved into the Chicago suburbs and started working in the mailroom of a large insurance company. There I met this person, I will call him Fred.

Fred was heavily into drugs…and he had gotten this job because of his Dad’s relationships in insurance. After a lot of asking, I gave into my first joint. Remember young people, this was illegal at the time. Not like today’s good ol’ times driving to the local dispensary. Long story short, this sent me down a significant downward spiral that peaked when some of the friends we hung out with attempted to kill me. I was surrounded by 3 of them with broken 40s (that’s a beer bottle) yelling at me for something I hadn’t even done. I stood my ground and another friend, not Fred, came to my help and the standoff ended. Fred patiently waiting for this whole thing watching from a basement window. Not my friend.

About that time, I decided, I needed to get my shit together. And here I am. But leaving that world was almost impossible. I ran in similar circles, and those had to be left behind. The death threats came and went, including from Fred. Eventually, I moved across the suburbs and didn’t run into any of them again. At one point during Covid, Fred tried to friend me on FB, and I just ignored it. It was an ugly departure from that world, and I have no need to return in any fashion.

Back to last week. I had not responded to Fred’s message for 4 weeks. I think that was my soul reminding me I left for a reason. At 4am one morning, he sent 4 messages to me via FB telling me that I was no better than anyone, living a fake life, a giant kitty (p word) and even called me the N word. Wow. That is very telling into the mind of this human. My pause and my gut were both right.

I share this because I’m guessing he was looking for a handout and not a chat about his Dad. I knew this person for 2 years over the past 30. Why me? I’m sure he’s had plenty of other people to talk to about this, including family. I know this is long, but I wanted to just tell any of you who are dealing with this, or perhaps are feeling guilty about something similar in the past, it’s okay. Do what is right for you mental health. I bet it’s a high percentage of the times it will, or would have, ended like mine here. Clearly he’s unstable. And in this economy, I need more stable!

Case in point, more talk about a looming recession. This first chart basically tells us that when an earnings recession ends, a recession looms. An earnings recession is when quarterly, earnings are dropping…even if they beat expectations. So is there a recession coming? Or will there be a soft landing by a Fed who has yet to get anything correct?

We’ve spoken about this before, but here is another look at the jobs reports from this year which told everyone that our economy was chugging along. But wait! Here are the revisions to the downside. Basically from Jan through July, we have had a change of 16% lower jobs created than we were initially told. 16%. Not like 1% or 2.5%...16%! If you were that far off in your job, would you still have that job? My accountant sure wouldn’t work for me any more.

Update on our 10yr-3mo chart…still below. What I can tell you is that the recession begins when the chart starts moving back and then over 0. Looks like we are heading that way. Let’s see if this is the only time in history that doesn’t happen. What does Vegas tell us? Never bet against the trend?

Update on those bank deposits…not good. I know this one is kind of fuzzy, but I think the red circle makes the point. Less deposits means less money to lend and that can mean disasters for bank earnings. A run on a bank is what caused some of our issues earlier this year. I don’t think we are out of the woods on this bank thing just yet.

More bank stuff because I am trying to put you to sleep. This chart has two things going on. The blue line is my concern. Usually down is good (unless it’s the MBS at the bottom). In this case, this tells us that until spring, there was about $0 being borrowed by the banks from the Fed. Now that stands around $108B (that’s a “B”). Yikes. And yes, they pay the high interest rates too. I’m sure this is fine though.

I’ve often been asked, what is wealth versus rich? I think there are different answers. But luckily, we have one about wealth for a few cities that most of you are in currently. This coming from Charles Schwab, Forbes, Economics Research Institute, Knight Frank and the Federal Reserve. Net worth is not just your liquid assets, but retirement, and of course, equity in your home. Buy a house! As a mortgage lender, I hate to start begging…but I will.

Well, maybe don’t spend it all right now. Here is a chart from the Federal Reserve showing that since 1990, we are currently in the 4th period of our net worth contracting. Yes, this has a lot to do with inflation, in my opinion. It’s different than the Great Financial Crisis because a lot of net worth dropped due to home values dropping and foreclosures. That’s why I call it the Housing Crisis instead of the GFC.

But wait! Maybe spend it…and buy a car! According to The Wall Street Journal, this car, made in Japan, is being offered to a few outside of Japan for the first time! It’s not my flavor, but if it’s yours…you can now get it without being in Japan! Maybe it depreciates less than my 2020 GMC? Maybe it doesn’t. I’m not gonna find out if it depreciates the same. No thank you!

10yr: This is a one year chart. You can see the pain to the upside (arrow) from spring until now. The past month, we are attempting not once, but twice to close above the high from last year. So far so good…but hanging around up here is awful. Rates are high, and we have another Fed meeting looming next week.

MBS: This one shows you that same attempt, this time to the downside because down means higher rates. This chart doesn’t look promising…but it does appear to be moving sideways (albeit up and down and up and down, etc) for the past year.

So things can always be worse. Some say I’m a Bear, and some say I am not positive. But through all of this, I’d rather own a mortgage company in this chaos after 20 years of building it than go back to being 20 with 3 guys ready to cut me open. I’m sure it was over a girl…again, I did nothing wrong. I’m guessing a lot of those guys are dead or in jail now. So hey, none of us live there! Keep your head up. It can always be worse. HAHA. Ugh. I don’t subscribe to the “it’s always darkest before the morning”. Mainly because I get up early almost every day. If the moon is rising, it was darker earlier. But I do know that if you decide you want something different, you can do it. If you know someone who needs help, help them. If they are there to drain you or your wallet, it’s okay to say no and move on. This is why I don’t just believe the government. Who wants to drain our wallets more than them?

What doesn’t kill us, only makes us stronger.


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