And I thought this was gonna be a quiet week. Well, that changed rather quickly. Biden fulfilled a campaign promise (shocking for a politician to do) and eliminated student loans (sort of). California decided to pull an EU move and ban the sale of ICE (Internal Combustion Engine) vehicles. Fed Chair Powell spoke and brought the markets to it's knees. If any of this sounds intriguing, take a second to
if you have not done so. But let’s get into it.
Tale of the Tape
Economy
Y'ALL AINT LISTENING!!
That was basically what Jerome told investors in his speech on Friday at the Jackson Hole Symposium aka Summer Camp for the rich and powerful. Unlike the regular 30+ min speech that Jerome Powell typically gives, this time he made it short and direct. He spoke for only 8 minutes and he did not give any caveats. This was extremely abnormal for Jerome but I think necessary.
In the last month, investors had gotten ahead of themselves and started pricing in that the fed will pull back on raising interest rates as inflation has a minuscule pullback going from 9% to 8.5%. Jerome Powell completely dispelled all of that myth when he spoke. Here is a key quote from the speech that shows his current mentality:
Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.
Right now, the only thing on the Fed’s mind is inflation and they are willing to do what they have to do to ensure it comes down.
Student Loans
Yeah, I forgot those were still a thing for a while. The last student loan moratorium was supposed to expire on August 31. But Biden was like
He extended the moratorium until December 31st because (and let’s be honest) of the midterm elections. But the important part of the announcement was on student loan forgiveness and also making loans more manageable for future borrowers. Here are the details from Axios:
Approximately 20 million Americans could have their debt completely canceled under Biden's announcement.
The debt forgiveness for Pell recipients is in addition to the cancellation of up to $10,000 in student debt for other borrowers.
Critically, the Biden administration is taking steps to make the student loan system more manageable for future borrowers.
It will cap monthly payments at 5% of a borrower's monthly income and forgive loan balances after 10 years of payments for borrowers with loan balances of $12,000 or less, among other measures. (I totally missed this when I first read through the advantages, this is MASSIVE)
The $10,000 in debt relief also applies to households that earn $250,000 a year or less.
Smart Move: IF YOU GOT STUDENT LOANS, START GATHERING PAYSLIPS, 1040, 1099, W2. Basically, just have everything prepared. Do not mess yourself up by delaying and putting things off. Even if you are not sure if you qualify or not, just get those documents in order. Also, keep in mind that just because this was announced does not mean that it is official. Expect a lot of court trials before this actually passes and becomes official.
My Take: I have no student loans and I am celebrating this decision. I also feel for all those who worked extra hard to pay off their loans. However, for those people, I bet they are already way ahead financially. So your sacrifice was not in vain, it made you who you are today. This loan forgiveness will help people on the very bottom of the income spectrum. Most of whom already defaulted on their loans. The average student loan is $28,000 meaning for most people this is not wiping away all their debt.
This leads to a more important question to ask. Which is What will you do now?
An unexpected blessing has fallen in your lap: A Debt Jubilee (something that I never thought would happen in the Capitalist US) but Jubilees do not last forever. It is a grace period for you to get on top of things and re-establish yourself.
For those whose loans are wiped out, this is a chance to turn your entire financial life around.
For those who still have loans, you have a moratorium to use to your advantage. To reduce your loan balance before interest is turned back on.
Either way, the ball is now in your court. NO MORE EXCUSES!
Here is a great video from Kyla on how loan forgiveness might affect various parts of the economy.
TL;DR of video: For those of us who do not have student loans, this will affect you. Because this will cost the government over $300 billion. Which is money they will have to make up in other ways (aka taxes). There is also a fear that this will be inflationary on the economy which is something we do not need right now. However, the loan moratorium has had more of an impact on prices already.
Think of someone who has not made a payment over the last two years
The things they were able to do or spend money on over that time period.
We underestimate little drips over a long period
$500 over two years is $12,000 or $1000 (which is the more common monthly loan payment) is $24,000.
More than the amount being forgiven for most people and more than the amount given in any of the stimulus payments from the last two years.
Negative Kelechi: It is also very possible this becomes an expectation from voters leading to a spiral of loans never getting paid back. Also, this does not solve the cost of education problem. So it is not crazy to think that we will be in the same situation in the future. From Axios' Dan Primack:
This is a systemic issue, which explains why most politicians have preferred to play along the easier margins.
Biden's primary responses to future loan obligations have been to increase the size of Pell Grants, to crack down on predatory schools and to reduce monthly repayment percentages. None addresses the costs of the product being financed.
Sentimental Kelechi: I read so many stories of how the loan moratorium has helped so many people. Regardless of what this may cost, I think it was important to begin the process of restoration in one way or another.
Layoffs Piling Up
Ford announced it will be cutting 3,000 white collar and contract jobs in order to slash costs for its pivot to Electric Vehicles. Late Last year, Ford separated its ICE (internal Combustion Engine) vehicles from its EV (Electric Vehicles) businesses. In the announcement of the layoffs, CEO Jim Farley said:
Building this future requires changing and reshaping virtually all aspects of the way we have operated for more than a century. None of this changes the fact that this is a difficult and emotional time. The people leaving the company this week are friends and coworkers and we want to thank them for all they have contributed to Ford. We have a duty to care for and support those affected — and we will live up to this duty — providing not only benefits but significant help to find new career opportunities.
We have talked about Apple, Microsoft, Tesla, Netflix, and other tech firms that performed layoffs earlier this year. That trend seems to be growing. A new Survey conducted by PwC, the consulting and accounting firm, found that 51% of companies have plans to layoff some percentage of their workforce. Although, the labor market remains strong; however, that is on the lower end of the pay spectrum. These layoffs target white collar/knowledge jobs.
My Takeaway: I will NEVER EVER EVER be loyal to any company. We are not family! I am a cog in a system and I get paid as I perform in that system. As such, I am replaceable. I am not angry about this. This is reality. It is the job of the leaders of the business to do everything to meet the needs of the business. The number 1 job of a business is to maximize profits for the shareholders. So as such, my job is to look out for my shareholders which are me, myself, and I.
I do this in two ways, I have an emergency fund and I stay in connection with recruiters. Always ready to make a move as necessary. It is my obligation to my shareholder to stay ready for anything, especially in a period where Jerome Powell wants to cause an increase in unemployment
All Hail the KING DOLLA
The US Dollar is at its strongest in 20 years. This is great for US buyers of foreign goods, it makes imports much cheaper. However, it makes US exports more expensive. This sounds like a good problem but if a product becomes too expensive. Buyers will find alternatives. So that is not so good for businesses.
Also, for US businesses that are international like Microsoft or Apple, this puts pressure on their balance sheets. They have to exchange currencies from other countries back to the greenback (fancy nerd word for dollars) and a stronger dollar reduces the amount of money they can get back.
One other thing ever heard the saying:
When the US sneezes
The West catches a cold
And the rest of the world gets pneumonia
A strong dollar is a bad sign for the rest of the world because it means investors are looking for safety. They remove their investments from everywhere and seek safety. The safest asset in the world is the US government-backed Dollar. This drives inflation for other nations which eventually leads to recessions.
Stats of the Week
Number of consecutive days that gas prices have fallen.
Correlates perfectly with the recent rise in Consumer Sentiment.
Gas prices determine so much for our money psychology, even for people who do not drive.
Number of Americans (about 2% of the labor force) who cannot work due to Long Covid according to a report from the Brookings Institute
This puts more pressure on labor shortage and might hold back layoffs
Brookings estimates this will cost $168 Billion in lost annual earnings
The last year Cali will allow the sale of Gas Powered vehicles in the State.
Big deal because California by itself would be the 5th largest economy in the World
The US literally has countries as states
The plan is extremely ambitious and possible but there are a few items that critics are pushing back on:
As we have seen over the last couple of years. Car supply chains remain destroyed and manufacturers can't even keep up with the demand for cars.
EV prices continue to go the opposite way of down. Meaning it's still not feasible for most in the public
However, most manufacturers already have a target to not sell or manufacture ICE vehicles by 2035
the number of viewers for the new Game of Thrones series, House of Dragon.
It was so popular it crashed various streaming sites.
It is the highest streaming premiere of any show in 2022 and the biggest in HBO's history
I won’t be watching it cause I found GoT nasty and this is the exact same thing
Looking Ahead
It’s all about JOBS this week. Various reports get released this week:
Tuesday - Bureau of Labor Statistics releases the JOLTS report aka number of quits
Wednesday - ADP releases National Employment Report aka private company payroll
Friday - the granddaddy of them all, the nonfarm payrolls from the Bureau of Labor Statistics. This is the one you will see in headlines or nerds like me quoting
The labor market has remained strong to this point with unemployment remaining below 4%. This has allowed the Fed to be very aggressive in raising rates. I wonder if their tune will change if unemployment ticks up faster than expected. But as of now, Jerome seems very focused on destroying inflation.
Sports I Care About Update
😲 Man U WON BACK TO BACK GAMES!!!!!! 🤯
But I will not allow myself to believe. My heart cannot take being destroyed this often.
College Football is BACK!! GO BLAZERS!!
I'm from Alabama so I have to do it
Thank you for Rocking With ME
If you enjoy the newsletter SHARE IT.
Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾
Extras
To The MOON
And I am not talking about stocks. Today at 8:30 am, NASA will be launching the first rocket to go to the moon for the first time since 1972. The test flight will last about six weeks. This will be an unmanned launch to ensure all systems are a go. I am excited for it!!
Wenn du mich siehst, dann weine
Translation, “If you see me, then weep”.
This was inscribed on a rock in the Elbe River that borders Germany. It is being dubbed the "Hunger Stone". With droughts all over the world, water levels are reaching levels not seen in centuries and sending ominous signs of what is to come. These inscriptions go back to 1417, as warnings for future generations to prepare for hunger and famine.
Some cool things were discovered though:
In Italy's longest River, the parched Po, ancient war helmets were found
In Serbia, 20 old Nazi war machines with explosives were discovered and caused an evacuation of 3,000 people
In Lombardy, a 100,000-year-old skill of deer, hyena, lion, and rhinos were found in parts of Lake Como
In Rome, a bridge was discovered that was probably built by emperor Nero
An entire town was found submerged in Portugal
In the US, we found dead bodies 😑 typical
TWITTER DRAMA
Elon and Twitter drama enters Stage 3 of every bad relationship. The friends are beginning to pitch in. But honestly, I cannot bring myself to care about this story anymore. So here is a link detailing what is happening if you really care about Elon this much.
BeReal IG
The sincerest form of flattery is imitation.
At least that is what Instagram is saying as it has copied ANOTHER app's feature. In this case, BeReal. Which is an app that is focused on Being Real (something IG knows ABSOLUTELY nothing about). The app alerts you at random times during the day. You have to share whatever you are doing at that exact point in time with your friends. It takes a picture using both your front and back cameras at the same time. It does not allow you to edit or do anything special. The app is much less focused on trying to be picture-perfect and more on building connections with friends.
The greatest strength of Facebook has not been in its originality. It is simply in the ability to copy and scale features much faster than competitors. And then kill off the competition before they ever really get a start.