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Tim Lindsey

Transitory?!

Happy Market Update!

As you may or may not know, it was very Snowy here this past Saturday. Once again, we did not get to play any football. The good news is that 4 weeks into the season, Jackson’s team is still undefeated! 1-0 is undefeated…look it up. While we smile about this, please keep me in your prayers. You see, as a newly ordained coach (again), the other coaches and I will have to start from scratch this weekend. Remember, our team is made up of 4 and 5 year olds. As is it, the “just turned 4” crowd is lucky to know they are outside. Hey! Jax was like that too. But it’s not easy trying to explain what a sweep is when they consider running the wrong direction half the time. For those of you who pity these kids, do not! Jim Marshall, who played for the MN Vikings, did run the wrong way in a game in 1964. He was a professional. So there is still hope! Here he is after discovering what we all know now…

 




 

Oops. Sometimes we make mistakes. That’s okay…coaches are here to help educate and lead them the right way…and tackle them if I have to. But kids make mistakes…sort of like when the Fed told us inflation would be transitory. Well, this is one hell of a transit!

 

Today is Fed Day. The Fed meets every 45 days and decides on rate policies that directly impact you on a daily basis. Don’t believe me? That Fed Funds Rate they move plays into PRIME which directly impacts your credit cards and other lines of credit. Basically, anything that has a variable interest rate. So what did the Fed do today? How is that impacting your life further? Well before I get that far, let me bring you up to speed on some important info that Powell seemed to either ignore or push off during his Q&A session.

 

First of all, how is the consumer doing? Update! On Tuesday, the Conference Board updated their consumer confidence measures…and it dropped, unexpectantly. In fact, it was a pretty large miss. That’s the blue line here. Are we finally starting to feel the pain of the high inflation?

 



 

Well, bad news. It is not over yet. This, also reported yesterday (Tuesday), shows that the employment cost index went up. That was also a miss, but in the wrong direction. If costs go up…what’s next? The goods you buy, as I’ve stated before. So this means inflation is not done yet. Powell, today, did bring up that it was not at their target. In fact, the quote from their meeting notes released at noon (mountain time) was that “In recent months, there has been a LACK of further progress toward the Committee’s 2 percent inflation objective.” Words are fun. This means, inflation is not yet under control. In fact, it’s going the wrong way as we’ve discussed in the recent newsletters. This chart shows it’s still moving against the Fed.

 



 

Okay, now what? Well, they want to slow employment and the economy to bring inflation back down to 2%. Well, Chicago PMI appears to be suggesting the economy is slowing. This is the part he chose to ignore, in my opinion. Chicago PMI is an index that follows manufacturing. A quote above 50 is expansion, and anything below 50 is contraction. The red line to the right was yesterday’s (Tuesday) index reading of 37.9. It missed an expectation of 45. Yikes. My other lines? I looked back to 1990 to see when the other times we were this low. Going from right to left, Nov 22…I think this probably was a catch up due to the huge inflation numbers we saw that summer. Next? Covid. Well, okay…not many people went to manufacturing jobs anywhere. Next? The Great Financial Crisis. Finally? The Tech Bust. Look, I know this sounds scary…but this is the chart telling us…not me. I just think that if you lived in this neighborhood, you’d move. But this is the sign of a strong economy? Powell’s words…not mine. Mine: No.

 



 

How are small businesses doing? I run one…granted, the mortgage world is in a recession after their huge years in 19, 20 and 21. So it’s hard to feel sorry for us. I get it. But what about other small businesses? According to Bloomberg in an article published last Friday, 43% “were unable to pay their rent in full.” Guys…that’s almost half. HALF. According to the Pew Research Center, 99.9% of US Firms are small businesses. And According to PIE Insurance, 47.5% of Americans are employed by small businesses. How is this not impactful?

 



 

While we are talking about business, there was another failed bank…so it ain’t over yet. From the Wall Street Journal, Republic First Bancorp was seized by regulators. With the Fed keeping long term rates higher for longer, will there be more? Exposure to bonds has been a huge factor as of recent. And I don’t think we are done yet.

 



 

And are we planning on doing anything on a personal level? According to the Conference Board (once again), and thanks to @NOD for this chart…sure we are! Well 18.5% said no chance in hell. Okay…but 44.8% said yes! “Food away from home” had the highest percentage of people committed to reduce spending over the next six months. Okay…that makes sense (vacations was half of that…oookkaaayyy). Anyway, why is this important? Well, a lot of the job growth we saw over the past year or so was in the service industry. Uh oh. If we don’t eat at Olive Garden, they cut servers and cooks. How are jobs going to look then? One note, alcohol was higher than home appliances? Hell no! Know what goes up during recession? “Heaving Drinking”. Look it up.

 



 

Nevermind. I looked it up for you. From The National Institutes of Health. Congrats to all of us that did NOT increase our alcohol consumption during the workday. #winning

 


 





 

10yr: I wish I knew how to use my keyboard to make one of those emoji looking guys with his hands up like…I don’t know. But I’m not that clever, and I just really don’t care. But it would be good here. Looking at this chart reminds me of years and years of Catholic Church. Up, down, up, down. (If you don’t understand ask one of your Catholic friends). This sideways move looks like consolidation to me. Rates really haven’t moved in the past 2 weeks, but when consolidating at the top, very well could mean a strong move up. That means higher rates. Tim, so tell us what’s new. I got nuttin’.

 



 

MBS: Reminder, up is down and down is up. Moving down means higher rates here. This is a one year chart (so each candlestick is a trading day). That rounded red line is top building itself, in my opinion. That supports my belief in higher rates, at least for the short term. I hope I’m wrong. I really do. But I’m sticking with my 0 rate cuts at this time. Seems like the odds are starting to move in my favor…there is a growing belief that there will only be 1 rate cut by the end of the year. It was 6 when we started the year.

 



 

This last chart shows the increasing probability of the Target Rate by the Fed from The CME Group. There is a larger probability that there will be a 25 rate cut (2nd bar graph from the right). But look at that increase in the 0 (all the way to the right). When it was basically a 0 chance a month ago, I was saying 0. That’s not me being prideful, that’s me reading the information and making an educated decision rather than listen to people who went on and on about that transitory inflation. I don’t listen to the talking heads, and you shouldn’t either. Do your research…or just keep reading my newsletter. I will give you the real charts that are making a difference. There are probably about 40 more charts I could have added like job openings shrinking, etc. I hope we get a rate cut(s)…my business loan could use it, for sure.

 



 

What doesn’t kill you, makes you stronger.

Tim

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