Crazy Times Remind Me of…
There’s a common and disturbing thread behind these volatile economic times and its akin to inside investing.
A little background… back in July, I stroked a post insinuating that Fannie Mae and Freddie Mac’s falling stock prices were the result of the Financial Accounting Standards Board (FASB) implementing an accounting standard that required mortgage loans to be viewed and have their financial viability reported in a far more transparent manner, including the GSEs (Fannie and Freddie). Whoopsy…liquid to insolvent overnight.
Two months later they melted into a government receivership, in other words the government bought Fannie and Freddie and shored them up with Treasury money.
Reading between the lines…
…Fannie and Freddie have always been staunch Washington beltway lobbyist and political campaign contributors…so they were not about to be left high and dry.
But what about mortgages not originated by the GSEs and held by other financial institutions?
All you have to do is open Pandora’s box once. The new transparent accounting standards infected most every financial institutions portfolio, as they contained vast, newly ‘toxic’ tranches of Mortgage Backed Securities. They began to fall one by one in well publicized fashion. I suggested this all seemed a little contrived, but it was purely speculation at the time.
Why the Bailout Came To Be
Well, the Treasury Department can’t buy everyone, and so The Bailout was crafted…a couple of times. I’m the first to admit to having no clue as to what it initially meant for Wall Street or Main Street, except that something had to be done in attempt to restore confidence in the Market, and $700B seemed like enough raw hard cash to shore things up for a bit. I could make that type of coin go a long way and it would give me new found confidence 🙂
Well, clues have begun to manifest. Still not sure if it was Mr. Green(span) in the kitchen with the pipe but, reading between the lines…I have a few (rhetorical) questions, while reading between the lines:
- Why doesn’t the Bailout provide money to banks to lend instead of buying up the toxic assets (similar to Europe’s ‘bailout’ plan)? They rode it all up, why shouldn’t they ride it down?
- Why did the U.S. Chamber of Commerce spend $30M in lobbying in the 3rd quarter this year, twice the amount spent in the 2nd quarter? Did you know AIG (yes that AIG which spends $400k on corporate retreats) contributes heavily to the Chamber?
- Did you know that Goldman Sachs was the largest corporate contributor to political campaigns this past quarter? The same Goldman Sachs that has many ‘former’ executives heading up the Treasury’s Bailout Plan?
- How about JP Morgan and Citigroup, the latter of which absorbed Chase, each contributing over $4M to political campaigns. Yes that JP and Citi, who also received handsome federal aid checks.
- If these company’s can buy their way into huge chunks of tax payer fueled cash for relatively little ‘investment’, how in the world can the markets ever hope to restore any semblance of consumer confidence??
Black Monday Casually Passed
On September 15th, 2008 the Dow Jones Industrial Average dropped 504 points, which was pretty shocking. Looking back it turned out to be ‘Just Another Black Monday’. Since then the Dow has had 5 of the top 10 single day largest point drops in history. Conversely, the Dow has had 5 of the top 10 single largest point gains since 9/15/08. Granted, a lot of money has left the market but its mainly Main Streets money that’s gone…under peoples mattresses or into ‘safer’ securities like Treasury bonds.
Reading between the lines, the people that truly run our economy are special interest, political backslapping, welfare check inducing, greedy, smarmy a-holes who really don’t care about you (or me). There is no real logic behind all this economic mumbo-jumbo, well there is, its called ‘hedge fund redemptions‘ but that’s another topic for another day. It’s just a big game that only a few party insiders are allowed to play in anyway…mainly those who contribute to the political campaigns who the bail them out when they’re out of money.
Quick logic test (and reading between lines):
If some people make money when the market goes up and some people make money when the market goes down…and the market is going up A LOT and falling back down A LOT…then some people are making A LOT of money.
I’m purposely not stating which political group received contribution from whom on purpose because it really doesn’t matter. What does matter is that there is a relatively small group of people making a BOAT load of money right now, and its not anyone from Main Street.
I hope they hurry the hell up so the rest of this country (and greater Earth) can get back to doing business with some confidence.
The Next American President
Finally, reading between the lines, whoever is elected President is going to inherit an economy on the rebound and will look like a genius. I guess he paid for it.
**This week’s sign that the economic markets are scraping bottom:
California’s median home price dropped 34% from $430,000 to $283,000 compared to this time last year…as a result, sales are up 65%. As California housing economics approach the other 49 states, you know we’re bottoming out.
Reading between the lines, its a great time to buy!
Boomers retirement may be the true reason behind the labor shortage
(ECONOMY) Millennials and Gen Z were quick to be blamed for the labor shortage, citing lazy work ethic- the cause could actually be Boomers retirement.
In July, we reported on the Great Resignation. With record numbers of resignations, there’s a huge labor shortage in the United States. Although there were many speculations about the reasons why, from “lazy” millennials to the number of deaths from Covid. Just recently, CNN reported that in November another 3.6 million Americans left the labor force. It’s been suggested that the younger generations don’t want to work but retiring Boomers might be the bigger culprit.
Why Boomers are leaving the labor force
CNN Business reports that 90% of the Americans who left the workplace were over 55 years old. It’s now being suggested that many of the people who have left the labor force since the beginning of the pandemic were older Americans, not Millennials or Gen Z, as we originally thought. Here are the reasons why:
- Boomers are more concerned about catching COVID-19 than their younger counterparts, so they aren’t returning to work. Boomers are less willing to risk their health.
- The robust real estate market has benefitted Boomers, who have more equity in their homes. Boomers have more options on the table than just returning to work.
- Employers aren’t creating or posting jobs that lure people out of retirement or those near retirement age.
As Boomers retire, how does this impact the overall labor economy?
According to CNN Business, there are signs that the labor shortage is abating. Employers are starting to see record number of applicants to most posted jobs. FedEx, for example, just got 111,000 applications in one week, the highest it has ever recorded. The U.S. Bureau of Labor Statistics projects that the pandemic-induced increase in retirement is only temporary. People who retired due to the risk of the pandemic will return to work as new strategies emerge to reduce the risk to their health. With new varients popping up, we will have to keep an eye on how the trend ultimately plays out.
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
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