Financial Crisis - 2013 - ????

[Ryan Ruck]

[Ryan Ruck]

[Malsua]

All I can say about this, is this.

This money will inflate for a while, then it is going to deflate like a MOFO.

What this means to you. Do not assume any more debt. Pay down any debt you might have.

Deflation means that wages go down.

Borrowing 30k when you make 100k a year? No problem. Next year you make 102k and the year after 105k, it just gets easier!

Now however, whenever this shit hits, You make 80k, then 60k Then 50k if you still have a job. Each dollar you pay back is worth 2 or 3 or 4 that you borrowed. That's some real pain. It's like a hidden 200%+ interest rate.

It's not nearly as painful if you have no debt. In fact, it becomes a massive boon! Over night your buying power effectively doubles.


The markets are going to continue to climb as long as the Fed is pumping money into the system like crazy. I used to think that QE was like a firehose. This is like the 35' diameter pipe that pumps water into NYC.

Just make sure you're in cash at some point. FOMO is real and I must admit, I'm sticking in there.

[Ryan Ruck]

What's equally insane right now is the real estate market.

I have been looking into buying a home right now and have been the last 2.5 months, even though I hadn't planned to until I was ready to relocate west but such is life, and real estate is completely dislocated from the current economic conditions with 38 million people unemployed and nearly every other sector pulling back.

I don't think my expectations are outrageous: ~1500 sqft minimum, ~2 acres minimum, pole barn/shop I can work on my truck in, and reasonably updated kitchen/baths all somewhere 30-45 minutes east outside of the I-275 loop around Cincinnati (not in a super prime area for commuting into the urban areas). I really didn't want to have to be in the place longer than 5 years so that's why I didn't want to get too crazy on expectations and stay with what I thought was reasonable price.

I originally set my budget at $175k which I thought was pretty reasonable for a first time home given what I was looking for and where I was looking for it. I found a place (1600sqft, 1.75ac, 4 car shop and a stable that needed work, 5 mins from my youngest brother), went under contract, but it failed inspection with a water main leak and water in the crawl. After that the beer bug stuff blew up, wasn't hardly finding anything after a couple weeks.

Anything around $130k-$150 was largely overpriced garbage only partly meeting my criteria. Nothing below that even met my criteria remotely. Decided to up my budget to $200k. Started finding a little more but still a lot of overpriced shit and stuff that isn't sells in hours, much faster than an individual working a full time job can take time out to see before it sells and often gets bid up. Meanwhile at the $220k-$350k+ range I can find a number of options, that do admittedly sell decently quick, but there's options.

Just watched an outdated 1999 double wide (had new floors throughout from the owner that owned a flooring company and only half done in proper drywall, no updates to the baths/kitchen since new) on 4.5 acres (where land prices are $5k-$6k/ac) with a shop, 45 minutes from Cincy go for almost $200k and it was on the market less than 2 days. I know how much it went for because I made an offer that I thought was an overpaying offer of $187k + $4k closing from the $197.5 listed and, the seller countered with only $500 off the price and just $3k closing, in fact asking for some concessions on time to move out of the property (a month after closing to move the business out of the shop building).

This pretty mediocre double wide I just got a notice on, on 1 acre, far outside the prime Cincy metro commute area is somehow a $140k place. Funny, just 6 years ago it was a $103k place. I guess adding a stainless fridge and range added $37k to the value...

Was supposed to have a showing last week on a $189k 1600sqft (with full basement), 3br/3ba, decently updated, with 30x40 pole barn, on 6ac, an hour outside of Cincinnati (and a half hour from any major retail) yesterday. It went pending within 24 hours before my scheduled showing, during a major rain storm before your typical 9-5 worker could even see it

So yeah, $200k barely buys what most would consider pretty reasonable rural living, at least where I am in SW Ohio which isn't exactly a hotbed of real estate of activity like other states, and anything that could be considered within the realm of "reasonable" is so scarce it's snatched up before the ink dries on the selling realtor's contract. I don't get it...

[Ryan Ruck]

So... Personal spending down a record near 14%, 40 million unemployed, 4.1 million people in mortgage forebearance, auto sales down 48%, money printer go brrrr and insane levels of Federal spending, major US city on fire and unrest in others...

But, tying into my last post, home demand up 5.5% from pre-pandemic levels!

[Ryan Ruck]

Sounds like the economy is on solid footing...

Fed Sees Zero Rates Through 2022, Commits To Keep Buying Bonds

June 10, 2020

The Federal Reserve pledged to maintain at least the current pace of asset purchases and projected interest rates will remain near zero through 2022, as Chairman Jerome Powell committed the central bank to using all its tools to help the economy recover from the coronavirus.

“We’re not even thinking about thinking about raising rates,” he told a video press conference Wednesday. “We are strongly committed to using our tools to do whatever we can for as long as it takes.”

The Federal Open Market Committee earlier said it would increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities “at least at the current pace” to sustain smooth market functioning.

A related statement from the New York Fed specified that the pace of the increase would be about $80 billion a month for purchases of Treasuries and about $40 billion of mortgage-backed securities.

“Acting on mortgage-backed securities and Treasuries underscores their belief that more support is needed,” said Diane Swonk, chief economist with Grant Thornton in Chicago. “The Fed does not see a victory in the employment bounce-back. The risk of deflation is still high and the economy needs more support to heal more fully.”

The dollar rebounded from day-lows and U.S. stocks erased initial gains as Powell spoke. The Treasury curve steepened sharply.

On Hold

The Fed’s quarterly projections -- updated for the first time since December, after officials skipped their March release amid the burgeoning pandemic -- showed all policy makers expect the funds rate to remain near zero through the end of 2021. All but two officials saw rates staying there through 2022.

The economy faces “considerable risks” over the medium term, the Fed said in its statement, reiterating language from the last FOMC meeting in late April.

Officials forecast the U.S. unemployment rate would fall to 9.3% in the final three months of the year from 13.3% in May, according to median estimates, and to decline to 6.5% in 2021. U.S. GDP was projected to contract by 6.5% this year before rebounding 5% next year.

Yield-Curve Control

Powell said the FOMC had received a briefing on yield-curve control -- a strategy to cap Treasury yields out to a specific maturity -- and told reporters that such discussions will continue at upcoming meetings. Economists surveyed by Bloomberg expect them to consider later this year.

[Ryan Ruck]

WHEN THE SHOESHINE BOYS TALK STOCKS IT WAS A GREAT SELL SIGNAL IN 1929 -- April 15, 1996

[Ryan Ruck]

'Act Big' Now To Save Economy, Worry About Debt Later, Yellen Says In Treasury Testimony

January 19, 2021

Janet Yellen, U.S. President-elect Joe Biden’s nominee for Treasury Secretary, urged lawmakers on Tuesday to “act big” on coronavirus relief spending, arguing that the economic benefits far outweigh the risks of a higher debt burden.

In more than three hours of confirmation hearing testimony, the former Federal Reserve chair laid out a vision of a more muscular Treasury that would act aggressively to reduce economic inequality, fight climate change and counter China’s unfair trade and subsidy practices.

Taxes on corporations and the wealthy will eventually need to rise to help finance Biden’s ambitious plans for investing in infrastructure, research and development, and for worker training to improve the U.S. economy’s competitiveness, she told members of the Senate Finance Committee.

But that would only come after reining in the coronavirus pandemic, which has killed over 400,000 in the United States, and the economic devastation it brought.

Yellen, who spoke by video link, said her task as Treasury chief will be to help Americans endure the final months of the pandemic as the population is vaccinated, and rebuild the economy to make it more competitive and create more prosperity and more jobs.

“Without further action we risk a longer, more painful recession now and longer-term scarring of the economy later,” she said.

Yellen said pandemic relief would take priority over tax increases, but corporations and the wealthy, which both benefited from 2017 Republican tax cuts “need to pay their fair share.”

She raised eyebrows of some senators and Wall Street when she said that Treasury would consider the possibility of taxing unrealized capital gains - through a “mark-to-market” mechanism - as well as other approaches to boost revenues.

DEBT BURDEN

She also that the value of the dollar should be determined by markets, a break from departing President Donald Trump’s desire for a weaker U.S. currency.

“The United States does not seek a weaker currency to gain competitive advantage and we should oppose attempts by other countries to do so,” she said.

Wall Street stocks rose on Tuesday in reaction to Yellen’s call for a hefty stimulus package, as well as to positive bank earnings updates. Oil prices also rose, while Treasury yields fell slightly on her comments that parts of the 2017 tax reform should be repealed.

Biden, who will be sworn into office on Wednesday, outlined a $1.9 trillion stimulus package proposal last week, saying bold investment was needed to jump-start the economy and accelerate the distribution of vaccines to bring the virus under control.

Asked what outlays would provide the biggest “bang for the buck,” Yellen said spending on public health and widespread vaccinations was the first step. Extended unemployment and nutrition aid, better known as food stamps, should be next, she said.

“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said.

She said even though the amount of debt relative to the economy has risen, the interest burden - the amount the Treasury pays to service its debt - has not, due to lower interest rates. She said she will watch that metric closely as the economy recovers.

NEW CLIMATE POST AT TREASURY

Yellen also called climate change an “existential threat” to the U.S. economy and said she would appoint a senior official at Treasury to oversee the issue and assess systemic risks it poses to the financial system.

She added investment in clean technologies and electric vehicles was needed to cut carbon emissions, keep the U.S. economy competitive and provide good jobs for American workers.

Yellen said China was the most important strategic competitor of the United States and underscored the determination of the Biden administration to crack down on what she called China’s “abusive, unfair and illegal practices.”

Asked whether China had committed “genocide” in its treatment of Muslim Uighurs as the Trump administration declared in a last-minute proclamation, Yellen said China is “guilty of horrendous human rights abuses, yes.”

Biden’s transition team urged the Senate to move swiftly to confirm Yellen. Democratic Senator Ron Wyden, who will lead the Finance Committee after Biden’s inauguration on Wednesday, said he would push for a confirmation vote on Thursday. Republican Senator Mike Crapo said he would work towards an “expeditious” confirmation for Yellen.

She also received the endorsement of all former Treasury secretaries, from George Schultz to Jack Lew, who urged senators in a letter to swiftly confirm Yellen’s nomination to avoid “setting back recovery efforts.” A spokeswoman for Treasury Secretary Steven Mnuchin, who steps down on Wednesday, did not respond to a request for comment.

[Ryan Ruck]

Edelbrock To Shutter Los Angeles County HQ After 83 Years

January 29, 2021

Edelbrock, manufacturer of some of the most popular performance aftermarket intake manifolds and cylinder heads for our favorite V-8 engines, is packing up its Torrance, California, headquarters over the next two months. The facility, Edelbrock’s home since 1999, has 270 employees, most of whom will be laid off. The first layoffs were announced on January 15.

Edelbrock’s Torrance facility is home to the company’s marketing department as well as its research and development team, which design and test intake manifolds, cylinder heads, fuel injection systems, and entire crate engine packages. It’s where unfinished castings from the company’s San Jacinto, California, foundry arrive for final touches and packaging before being sent to speed shops and large retailers like Summit Racing and Jegs. The facility also assembles superchargers, including some that are original equipment on sports cars.

Edelbrock joining forces with Comp Performance Group, owners of Comp Cams and a number of performance aftermarket companies, is what set this change in motion. The union brings into existence one of the largest conglomerates in the performance industry. Edelbrock began moving some of its operations to a new facility in Olive Branch, Mississippi, beginning early in 2020. That new location will be the future headquarters of both Edelbrock and Comp Performance Group. Comp Cams is leaving its longtime home in Memphis, Tennessee.

We spoke to a veteran Edelbrock employee, who told us that Edelbrock plans to keep its two foundry facilities in California. The company will also retain its Edelbrock Race Center in Mooresville, North Carolina, amid the heart of NASCAR country.

Edelbrock has been a constant presence in the automotive aftermarket, and Los Angeles, ever since Vic Edelbrock first designed his Slingshot intake manifold for the Ford flathead V-8 in 1938. Its move to Mississippi, along with Comp Performance Group, is a loss for L.A. and Memphis, but hopefully, it means the companies can continue to innovate and serve the performance market with compelling products.

[Ryan Ruck]

In today's episode of "Inflation? What inflation?"

Yesterday, I picked up a couple things for my Independence Day cookout at my local GFS/Gordon Food Service.

I've long bought my bacon from GFS because they have a usually well priced, tasty, thick cut bacon. "Well priced" was a regular price of $10.99 per 3lb pack, typically on sale for $9.99 quite often, for as long as I can remember shopping there. Sometimes it hit $11.99, I suspect due to fluctuating commodity prices, but it never seemed to last long.

I haven't bought any for a while as I've cut back on my big weekend breakfast meals with moving and I've had some set back in my deep freezers so just haven't needed any since about this time last year.

Well, this was yesterday...



Yes, if you do the math, that's a 40% YoY increase in a rather basic food staple from what I could usually buy it at.

I damn well know my pay hasn't seen a 40% increase...

I tend to keep pretty close mental track of what I spend on groceries typically. Since the beginning of the year, I've easily seen a $125-$150 increase in my monthly grocery purchases.

The poors won't notice this because their EBT payments will just be adjusted to keep them fat and happy. The wealthy might notice it but won't pay it much attention. Meanwhile the heavy squeeze on the middle class continues. Yay.