Happy Market Update! |
Jackson turns 6 today (Wednesday)…it seems like yesterday he was only 5. Man does time fly. But I get to watch, in real time, this toddler become a kid complaining about not being big yet. I finally understand why everyone tells you to not be in a hurry to grow up. Case in point…do you think he cares who gets elected in the next Presidential election? Trick question! Of course he does. Okay, bad example…how about we go with paying bills? That one for sure he doesn’t understand. |
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Jackson did start football again for the fall. So I’m hoping to have some stories to share with you about that…we are 0-1. That’s the full story for this week. |
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The one bright spot…we throw the football in this league! But…the first throw was a pick six. No, Jackson was not the QB. He would have overthrown everyone. He’s a lefty, and he can toss it. But he also seems to want to tackle…so maybe he’s a linebacker? I know, I know. You are thinking the QB makes more money and everyone is afraid to tackle him now. Linebackers are going to get paid…but also have bones crushed. I get it. But linebackers are born, in my opinion. So we will see how he chooses down the road. Hell, maybe he will surprise us all and go with basket weaving. Yikes! But this is why I tell him there will be no money for him from me. That should keep basket weaving (and a whole lot of liberal arts) away!
Wanna know what won’t go away? The constant talk about this election, the Fed moving rates, and employment. Let’s start with today’s jobs report (remember…this is a BLS survey only. It’s a survey). This survey…came in almost twice as high as the forecasts! And that has absolutely crushed the refinance market that was trying to get started. I’ve had some people tell me they were waiting on lower rates…and yikes. The 10yr yield is up almost 40 basis points since the Fed lowered their Fed Funds Rate by 50 basis points. So that’s a wash. We’ll get to the yield below. But first…jobs!
So the unemployment rate ticked down again to 4.1%. As discussed previously, when we move above 4%...recessions typically start. We shall see if that holds true…or if we move the goalposts like a couple of years ago…or…? Who knows? Here are the jobs. Gold line is the forecast…and the blue is where it comes in at. The previous months have seen revisions to the downside. But the damage today is done in the bond market. |
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Other damage done? Yesterday, there was a 50/50 change of the Fed moving the Fed Funds Rate another 25 or 50 points in early November. Check this out. Now it’s a full 95% chance that they would only move it 25. In fact, there is now a 5% change that they don’t move at all. What a difference a day makes. |
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This would imply the economy is good. Maybe it is…or maybe we are keeping it there with our credit cards. Regardless, I look for charts…this one for example. Did you know that 42% of the Russell 2000 index had companies with negative earnings? Not low…negative. Nope. We just keep talking about AI. This sounds like something the media should report on. Tell me it’s happening and why we shouldn’t worry about it. It’s not McDonald’s…but these are not Mom and Pop shops either. |
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Borrowed this from our good friend, @NOD008 on X. I like his definition of this chart: The difference between 6-month market expectations regarding Fed interest rates and the current rates is the largest since the 2008 GFC What does this mean? Each time since the late 80s that we are down this low…we have a recession. Why would this time be different? |
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What else isn’t done? Israel – Iran…or maybe the whole damn world. This is the sky over Tel Aviv on the 1st. Yes, this is in retaliation of attacks by Israel on the terrorist organization Hezbollah, believed to be funded by Iran. I took Poli Sci as my major…and I took a lot of classes on the psychology of terrorism at Northwestern. This fight has been going on since the dark ages and has no intent on ending. I’m worried this accelerates…the US has already contributed now (and this spring when Iran launched missiles the “first” time this go around). This is not good for your 401k…unless you own a sh*tton of Lockheed Martin. (Ticker symbol LMT…not investment advice.) |
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From our friend NOD, again. He’s pretty good about posting cool stuff…so I steal it! However, I thought about this a bit further. If you look at the USA…you can see we are basically flat since 2008. I’d like to point out that during those 16 years…12 years had a Democrat in the executive branch and roughly the same amount of time had the Majority Leader in the Senate as a Democrat. And they are the party of the people? I understand this is a bit more political than I usually get…and I’m not saying Trump is the guy. I’m just saying…nah, screaming to DC…STOP LYING TO US AND PRETENDING YOU CARE. We cannot fix things here until we ALL have real conversations about what’s going on. |
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I’ll end this with some good news. Your 401ks are happy right now. Here is a chart of the SPY, the ETF for the S&P 500./ We are sitting near all time highs. If you’ve got money invested, today is a good day to go get a beer. |
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10yr: If you are hoping for lower interest rates on homes, this is going to hurt. First, I’ve pointed to the Fed lowering 50bps. And we have gone up. In the past 3 days…we have gone, way up! Since the low candlestick the day before the Fed, when we hit 3.60, we are almost up 40, as I mentioned earlier, up at 3.97% right now. Above 4%...and we are going to feel some pain. So what’s going on? Well, I think the bond market is telling us that the Fed should not have pivoted yet. That’s my personal belief. |
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MBS: Reminder: up here is lower interest rates. Oops. That is a steep decline, quickly. We are below the blue and red lines…those are moving averages of 25 and 50 days. It’s a long drop to the green one, which is a 100 day moving average. Let’s hope we don’t head that way. |
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Why do I worry about rates? I will leave you with this chart. This shows states that have inventory at or below pre-pandemic levels. There are 8 states that have higher inventory than 5 years ago. And these are populous states, some of them western states. In real estate, we have watched things happen there and move east. Is that happening again now? Maybe…and higher rates are going to drive the other states higher, in my opinion. People are out of money whether the government wants to tell us the truth or not. Hell, FEMA is out of money, according to FEMA. We are in deep doo-doo. |
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What doesn’t kill us makes us stronger. |
Tim |
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