Papa Powell told everyone
Investors did not like it
Stock Market Returns:
Tale of the Tape
Economy
The Fed as expected raised interest rates once gain by 75 basis points, making your life that much more expensive. Despite the continued heavy-handedness of the Federal Reserve, the labor market continues to push forward. Job openings increased by 199,000 in October much higher than expected. ADP reported private payroll increase of 239,000 and wage increases of 7.7%. The Department of Labor followed up on Friday, with the jobs report for the month of October. 261,000 jobs were added and the unemployment rate increased to 3.7% (but still historically low). Wages also increased by 4.7%. September payroll was also revised upwards from 263,000 jobs to 315,000 jobs.
This spooked the Stock Market because right now bad news is good news and good news is bad news. It points to a high likelihood that the Fed will raise rates in December by 75 basis points. Which is not the Christmas gift investors would like. Then to follow up on that good news, Jerome Powell addressed everyone on Wednesday and said exactly what investors did not want to hear.
"It's very premature, in my view, to think about or be talking about pausing our rate hikes. We have a ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected."
Then when asked if a soft landing (which is bringing down inflation without a recession) was still possible. Jerome said
"Has it narrowed? Yes. Is it still possible? Yes." But then he added, "Policy needs to be more restrictive, and that narrows the path to a soft landing,"
In other words, Nope a soft landing is no longer a priority for the Fed.
The S&P 500 dropped 2.5% after the announcement.
My Takeaway: Monetary Policy was not the only thing that got us in this position, yet it is expected to be the only thing that will bring us out. It means the pain will continue for a long time. This is going to be more like death by a thousand cuts than using the Guillotine. We need fiscal policy to be a part of this process. But as I have said before, no person in Congress has the balls to raise taxes either on corporations or individuals.
Plus, we consumers are a problem as well. Our actions are too LOUD. We are spending non-stop. We are accepting the increased prices from businesses which is telling the Fed, we can absorb the interest rate hikes.
Despite the Labor Market appearing strong, there are pockets that are showing major weakness. Continually we see tech companies announce either layoffs or hiring freezes as they fight to manage the cost of their businesses.
Stripe announced a 14% workforce reduction
Lyft announced another 13% workforce reduction
Chime announced a 12% workforce reduction
Amazon extended its hiring freeze from its retail division to all divisions across its corporate workforce.
Elon plans 75% reduction at Twitter
My Takeaway: Unemployment increased from 3.55 in September to 3.7% in October. Unfortunately unlike past months where the number increased because more people entered the workforce. This time it was because more people lost their jobs. The headline employment number looks good but beneath the surface, there is a storm brewing. The Fed is getting exactly what it wants.
Stats of the Week
20 Lbs.
The typical size of a Thanksgiving Turkey
Unfortunately not this year, due to an avian flu outbreak there is a massive shortage of turkeys this year.
It is also causing the prices of turkey to go up
Amount Call of Duty Modern Warefare made in the first 72 hours of launch
This breaks all gaming records
This also shows why Microsoft wanted to buy the company
Salary ranges from a job posting from Citigroup
A new law went into effect in New York City where employers have to post the salary range for any position for any business that has 4 or more employees
The ranges have been all over the place and like always more information does not always mean it’s helpful
More than anything, companies are using this as a cover and keeping things as opaque as possible
The idea of the law was to provide pay transparency but the way I see it, it just gives employers more cop-outs.
The share of first-time homebuyers
This is the lowest in recorded home-buying history in the US
Also, the age of first-time homebuyers climbed to 36, the oldest in history
As rates continue to climb as the Fed raises rates and home prices took off like a rocket ship over the pandemic. It has made it that much harder for anyone to buy a house, especially those who do not already own a home that can be leveraged
Looking Ahead
Two things I will be on the lookout for this week:
Inflation numbers for the month so of October
I expect the number to have reduced from September.
However, core inflation (which removes food and energy prices) will probably increase because services are charging more for everything especially rent
Consumer Sentiment Index
As you know this is my favorite economic indicator
The numbers have remained around 60 which is extremely pessimistic
If people are still feeling horrible about the economy, we can basically book a recession to happen in the next 6 months in my opinion.
We also get earnings from Disney and Activision Blizzard.
Disney is important because I own the stock and I wanna see how its subscriber growth compares to Netflix
Activision is important because I open Microsoft and Microsoft is trying to buy the company
Sports I Care About Update
It was a big weekend in Georgia. Tennessee, the number 2 College Football team in the country, came to town to face the Georgia Bulldogs, the number 1 College Football team. It was not even close, Georgia absolutely demolished Tennessee.
The scoreline does not properly reflect just how badly Georgia beat Tennessee.
More importantly, Man U SUCKS!!
They were back to their old ways of SUCKING! After going on a positive winning streak for the last month, they returned to their old tricks of forgetting how to play football. In the Europa League, they beat Real Sociedad on Thursday. Which was whatever
On Sunday, they lost to Aston Villa. It’s not just that they lost, it was the way in which they lost. It was like all the progress that ten Hag has made over the last month was just gone. They looked like the team from the beginning of the year. It was TRAGIC to watch.
Until Next Time Thanks for Rocking With ME
If you enjoy the newsletter SHARE IT.
Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾