The future is not just unknown. It's unknowable
-Howard Marks
Anyone who tries to tell you that they know what will happen in the future is one of two things. The person is either dumb and actually believes what they are saying or is slick and is trying to sell you something. In both situations, we ignore and avoid the person. One is too dangerous because they do not know anything. The other will leave you broke.
Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Markets
The Stock Market has been acting like a child juiced up on caffeine and sugar. Gets super high but then crashes HARD and is sick for a few days.
This newsletter is 1,732 words an 8 min read
Tale of the Tape
Economy
Jerome saw the banking chaos over the last two weeks and said I DO NOT CARE! We are raising interest rates by another 0.25%. His focus remains bringing inflation down, which is very consistent with everything he has been saying for the last year. Unfortunately, no one has been listening. Except for you guys who read this newsletter.
Result: This brings the Fed Funds Rate to 5%.
After the announcement, Stock Market dropped rapidly as investors had previously been expecting no more rate increases.
S&P 500 fell 1.65%
NASDAQ fell 1.6%
Dow fell 1.63%
However, on Thursday stocks were ripping as investors realized what Jerome actually said
💬In His Words: Papa Powell during his press conference said, "The events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes"
Explanation: We were gonna raise by 0.5% but after SVB failed and First Republic Bank was about to fail, we decided to chill a bit. But inflation still sucks and needs to be brought down.
He also noted that the Fed may have less work to do in the future concerning tightening the economy.
That was all investors wanted to hear which is why stocks keep going up.
Takeaway: With unemployment remaining low, the Fed had all the ammunition it needed to keep increasing rates. However, the room for error has completely evaporated with SVB falling apart. The Fed understands that credit markets will seize up and layoffs will increase as banks restrict lending to sure up their books.
My Takeaway: The Fed has accomplished its mission of changing the market's sentiment. Expect a lot more domino effects to begin playing out. The recession that many have been predicting for the last year, might finally begin to rare its ugly head. As Banks tighten lending conditions more companies will run out of access to capital. Protect yourself fam.
According to a new study from Fidelity, Millennials are the least financially prepared group for retirement.
🔢By the Numbers: Less than 30% of Savers are on track to be able to replace their earned income with retirement savings.
This is a massive drop from the 50% that were on track Pre-Pandemic
😱What happened?: The Pandemics spooked a lot of Savers. According to Fidelity:
The two main drivers behind the drop in readiness, saving less and making safer investment decisions, are a natural reaction during a challenging financial environment. It noted Americans have had to deal with the effects of the COVID-19 pandemic, market swings, and the recent banking turmoil.
Essentially people stopped investing because they were scared of losing money.
Takeaway: Always have a plan when things are calm and stick to that plan when things go crazy. Part of investing is riding the waves of the markets. You cannot get higher returns without also dealing with the possibility of losing money. For all my fellow investors, play for the long haul. That's how you get your best results.
Stats of the Week
On Monday, Amazon announced another 9,000 layoffs. This is after announcing a layoff of 18,000 employees in January. The layoffs will be in Amazon's AWS, Twitch, Advertising, and human resources divisions.
💬In His Words: Andy Jassy said in a letter to employees, "The overriding tenet of our annual planning this year was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences that we believe can meaningfully improve customers’ lives and Amazon as a whole."
Takeaway: Big Tech party of the last two decades is officially OVER. Big Tech is just like every other company that uses layoffs to balance its books. Much like Facebook, Amazon has entered the world of efficient business building, and the days of wild ideas and shooting for the moon are OVER!
My Takeaway: There is no such thing as a "stable or safe" job. We as employees are nothing more than a sometimes necessary cost center for a business. In good times, we are beneficial to the bottom line of businesses. In bad times, we are detrimental to the bottom line of businesses. We have a few options to take some semblance of control back:
Become an entrepreneur (this is not for me).
Always be networking and always be open to new opportunities.
Use your time as an employee to build up assets that can replace your income (what I am trying to do)
Do not wait for something to happen before you plan for the possibility that you might lose your income. More than likely it will happen at some point in our working life. We have to build a way to ensure we can survive and thrive. This is why I talk so much about having an emergency fund. This is also a reminder for me to double down on getting my Emergency Fund back to a good point.
But even more importantly we must plan our lives to be what we want them to be not what our job allows them to become. Use the resources from your job to build the life you want. Saving money gives you options
UPDATE: Indeed announced a 2,200-worker layoff on Wednesday. Accenture announced a 19,000-worker layoff on Thursday.
According to the Census Bureau, 3 million Households earning more than $150,000 are renters.
🔢By the Numbers: From 2016 to 2021, the number of renters rose 87%
Takeaway: It costs too much to buy a house today. A house used to be a key aspect of the American dream but that has become part of the American Horror Story. Home prices increased by over 30% since the pandemic and continue to climb by at least 5+% over the last year. It is making it harder for everyone to be able to afford a house
My Takeaway: Making 6 figures is no longer what it once was.
$100,000 in 1990 is now $230,175.98 when adjusted for inflation.
The median home sale in 1990 was $123,000, which is $230,707.
As of February, the median home sold for $363,700
Here's some good news. For the first time in 11 years, median home prices fell by a whopping 0.2% 😑.
🔢By the Numbers: Median Home Prices in 2022 were $363,700
In 2023 it's $363,000
The change led to a 14.5% increase in home sales in February
Takeaway: Homes are still expensive but seem prices are finally coming down. Interest rates are still high (7.48%) so affordability is still a problem.
The Madness of March is not just about college basketball. It is all about betting and the madness of people believing they can actually beat the odds against sports books.
🔢By The Numbers: In 2022, an estimated $3.1 Billion were spent on bets.
With more states legalizing gambling, it is estimated that 68 million US adults will place $15.5 Billion worth of bets
Takeaway: The house always wins. If you're going to make a bet please do it with money you can afford to lose.
Looking Ahead
There is nothing that is happening this week that is interesting enough to talk about. I mean there is the Personal Consumption Expenditures Price Index aka PCE, which is the Fed's preferred gauge of inflation. It will be released on Friday for the month of February. But we already know how the Fed feels about inflation so this report is whatever to me.
On Friday, we also get the Consumer Sentiment survey that gives us an idea of how people are feeling about the economy. Last year, every release was like a new episode of Game of Thrones. We all stopped to parse through the data. This year we know exactly how everyone feels, TERRIBLE. The survey is no longer giving as many insights as I would like.
So yeah, going to be a pretty boring week at least when it comes to Economic news. But we already know we humans tend to break stuff so I'm sure there will be some major panic-inducing thing that happens this week.
Sports I Love
It is an international break for soccer so it was a pretty boring sports week.
Extras
If you're looking for a way to get some free stuff because inflation is real. There's something called Buy Nothing Groups.
Huh?: According to Money Scoop:
Buy Nothing (BN) is a national movement dedicated to building community through the "no strings attached" exchange of free goods. And when we say free goods, we mean...literally everything.
Need moving boxes? Buy Nothing. Looking for gently used household appliances? Buy Nothing. Free Spanish lessons? Buy Nothing! There’s no haggling, no squabbling, and no strings—just neighbors looking to part with free goods and, occasionally, helpful services.
You can find your local Buy Nothing group on social media. (I recently moved to a new neighborhood and immediately joined my hyper-local BN community on Facebook—someone’s giving away an entire dining set!) It’s obviously a great way to save money, but it’s also a solid tactic to reduce your personal household waste.
In the next Fast Furious, you will no longer see Dom destroying streets with a Gas powered Dodge Muscle Car. Dodge released their last production muscle car on Tuesday.
The END of An ERA
GM announced on Thursday the last Camaro will come off the assembly line in January.
Takeaway: As Electric Vehicles become the standard, car companies are balancing letting go of old cars to have the capital to invest in new electric vehicles.
*I am a tiny shareholder in this company.