Reflecting on The Past

Happy Market Update! 

Yes, I know I did not have a newsletter last week. Sometimes writers get blocked by their own minds. At least you know that I don’t use AI to write it. But hey, give me a break on this. Today’s my birthday. So you are not allowed to be mean to me until 12:01am. Then, have at it. Why does that not bother me? Well, I have told many people over the years that when I turned 50 I would start REALLY telling people how I felt and what I thought. And you thought the last 4 years was bad? Haha. Well, I turn 50 at 9:59am MT this morning. At this writing, I have 30 mins to go.

In all reality, I keep waiting for this mid-life crisis I’ve always heard about. I mean the one where you go spend all your money on dumb stuff. (Wine is not dumb stuff.) Sure, I’ve thought about changing careers. Who hasn’t? And what the hell does that have to do with midlife? I think it has to do with stress and rough weeks outnumbering the days. Now some of you are asking, does Tim think he is living to 100? 40-ish is more mid-life. Naw. I actually enjoyed my 40s and that was after enjoying my 30s. Both those decades crushed my 20s or being a kid. So what will the 50s have for me? Well, I’ve been preparing for this moment with my food intake, working out, and building of a business while learning new trades (like trading). I believe that as long as we continue to grow and take care of ourselves, we are going to be fine. I must be optimistic.

What I did not expect was the reflecting that my mind has decided to do over the past 60 days. You know how a song will trigger a memory? Me too…but the difference this time is that the memory seems to drag on…or add a second one to it. It’s weird. I turned as a teenager to not look backwards. It was way too tough to remember. So I pushed myself to live in the future. And yes, I am aware that this skips over the present. I’m trying to live there with Jackson now…since his world is “today” and that’s almost it. He’s 5, mind you. So reflecting has been…uncomfortable. It’s not just songs…it’s an activity, or a conversation that has triggered memories I have forgotten…some of them I know why I chose to forget. So it’s odd for me to participate in this reflecting. (So…yeah…I was looking for a “I’m terrified of reflecting” looking pic and this is what was suggested. Nailed it.)

How did you know this already? I have been preaching about what is coming…based on what is happening. Then yes, looking to the left (thank you, AJ) to see what the past tells us about the future. Hhmm…maybe this is why I have started reflecting in other parts of life. It’s scary! But not as scary as the lies from The Swamp.

“They” continue to tell us things are fine. Are they? I have been suggesting that inflation as not done. And again, I think JPow knows it…but that’s not his biggest threat now (per him). Take this chart of PCE from last week. This is the Fed’s favorite inflation meter. As always, I’ve made a nice red pen mark to point your attention to what I see. Um…that is a bounce up. Oops. No revision yet to last month…but the previous one had a revision up to match the previous 2 months…and the one early in the year was even higher. See? They are not telling us the truths in real time. 

But the consumer is good. Yes, we do continue to buy…but that’s what consumers do…they consume until they cannot any more. And consumers will push it to the limits. But oh man, this chart says that limit is arriving. Because we could not spend much in 2020 and early 2021 (depending on what shutdown state you might have lived in), we saved. That came with the Biden “relief” money that apparently no one actually needed based on this chart, IMO. Yes, I’m salty. I did not get one of those checks. I don’t know that I have ever received a check from the Fed government, other than an actual tax return…and that was decades ago. I digress. In April of this year, that officially turned negative. Negative. And this with all time credit card debt and record interest rates on that debt. If this does not make you feel sick, then your stomach can handle just about anything.

But here is one reason that I believe shows why the masses feel good. 1/3rd of the entire population has a home worth $500k or more. But that does NOT mean we can access the equity without heavy expense…or better yet, that there is even enough equity to tap into it. If you are in your home a decade or more…sure…but try getting a HELOC in the high single digits, or for some, double digits. Ouch. 

Also in the news is the bull market we have been in for the better part of a year and a half. While yes, the Nasdaq has been on a tear, we are entering into one of the most volatile times of year in stocks. This is a volatility index for the S&P500. Typically, the increase in volatility (so up on this chart) means lower stocks. We are leaving July and you can see that August, September…and especially, October don’t bode well for our retirement funds. But don’t panic…Santa is not far off from that.

But hey, the Fed will lower rates! You told us they wouldn’t. Yep…and I still don’t think they should. See the PCE chart above. They told us inflation was the issue…and they moved the goalposts. Or, as I have said in the past, they gave up on that goal…which impacts us all. I do not believe that they will move rates today (the July Fed meeting ends). But there is a strong chance they move in September…45-ish days from now. The other two items on the below calendar I want to point out…ADP jobs came in low (maybe that’s what JPow is concerned about), and that Chicago PMI. Anything below 50 is economic retraction. This PMI has been under 50 all year. But go ahead and “reject the evidence of your eyes and ears”. I won’t be doing that.

Just a quick look at our 10-2 yield curve. This is being talked about a lot by the talking heads. This is the curve, below 0 (still) for about the past year. Look how close we got to crossing that 0 line in the last week. History tells us that when it moves above 0, recessions begin.

10yr: Still in our nice downward trend since May…and today, before the Fed meeting, we are hitting that nice, orange horizontal line at 4.089% that I drew a long time ago. The 4 red lines I drew are to show you the support and resistance it has been over the past 9 months. So it’s important to get below that. 4% might be a psychological line…but then that 3.78-3.82% area will be dramatic too. This might be the beginning of the end of the higher rates (for now).

MBS: That’s a nice uptrend. Up means lower rates. We are nearing the high side…and need to keep breaking on through to lower rates. 

Here is my promise to you…I am going nowhere. “They” will have to drag me out by force. My goal is to get more ornery towards DC…I don’t give a sh*t who is in charge. Until they stop lying to us, gaslighting us, deceiving us, I am going to make sure I am screaming as loud as I can. So yes, I will be getting hoarse for years…nah…decades to come. Buckle up!

What does not kill you makes you stronger.

Tim