Damn.
The U.S. economy remains strong and despite the constant complaining, consumers are still spending too much and remain employed (for now). Gas prices have retreated significantly off their highs (Fed doesn’t affect this), house prices are dropping sharply (although largely offset by rising interest rates), and inventories are somewhat getting normalish. Unfortunately, that pesky inflation is still far above ideal levels and the Fed can’t sleep at night.
The American Dream is dumb. We’re not all supposed to be wealthy and one’s dream is often at the expense of someone else’s. And lately, we’ve all had too much money – that ain’t good. Not only does this spreading of cash (money printing during covid) increase inflation, it gives too many people the power to negotiate wages, stay out of the workforce, pay cash for homes, etc. The top of the food chain wants everything to get back to normal and will tank the economy to get us there. Because of this, I have no reason to believe that the equities market will recover anytime soon. Don’t fight the Fed, right? Oh, and don’t fight the powers hiding in shadows.
Unemployment levels are at pre-covid levels (3.5%) and should have ticked up by now. Until we see over 4%, the Fed will continue to have the confidence necessary to raise rates, wild-child style. Employment has a much bigger affect on the economy than rising rates. Consumer spending will dry up quickly if employment confidence becomes threatened. That’s how a recession really gets nasty.
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So, what am I doing? Well, I’m still largely in cash, thankfully. My combined investments are down only 5.8% YTD (not counting real estate values/fluctuations) and although my cash is getting smacked due to inflation, I’m comfortably positioned in anticipation of 4% unemployment. Once we get there, I’ll start moving money into oversold equities. The Fed can’t force unemployment to 5%. They’ll have to slow and that’ll be encouraging to equity markets.
The only positions I’ve taken lately of note is in safety. For example, I bought a handful of I Bonds from treasury direct. There are a few restrictions, but it’s gonna help generate a little income (currently yielding over 9%). I also added to my Fundrise account. Outside of that, I plan to wait and listen to what the market tells us. Whispers of the Fed slowing the rate increases; Russian war news; employment numbers and confidence. Until the intentional hammering of the market hints at a bottom, I’ll spend more time away from my computer.
From the ADP:
“Going from 16.2% annual pay growth last month to 15.7% in September was notable to us,” @ADP Chief Economist @NelaRichardson says on the upcoming jobs report data. “And it shows that maybe wages won’t be that big driver of inflation in the future.” pic.twitter.com/EsgmvL3FDi
— Yahoo Finance (@YahooFinance) October 5, 2022
the path of rates relative to start of the year has been tracking 1981
not something many were predicting at the start of this year pic.twitter.com/7v4RxfskMK
— 📈 Len Kiefer 📊 (@lenkiefer) October 5, 2022
Of interest to me, but not of markets, Texas Longhorns put the hammer down on an uncaracteristically bad OU team.
The Mullet 🤝 The golden hat@QuinnEwers | #HookEm pic.twitter.com/N1bFLWDD9f
— Texas Longhorns (@TexasLonghorns) October 8, 2022
