Rates are UP again today because of increasing tensions with Iran, and – because our economy is booming (darn it!).
Iranian tensions push up oil prices, sparking inflation fears that push up rates.
But a booming economy also pushes up rates, as bond investors demand higher yields when they expect strong growth (because they think it will foster inflation and/or Fed rate increases, and because bonds have to offer higher yields to compete with booming stocks).
It turns out our economy is definitely booming – and the proof is fascinating because it is something 99% of us never notice or consider.
Enter Phil Andrews, the longhaired, hippie, Marin County based, engineer, professorial host of my favorite YouTube channel: Maxinomics.
Phil just released this short video, and I highly recommend it: Americans Are About to Get a Lot Richer.
Phil says he has never been so bullish on the U.S. economy – and it is because of Flatbed Truck Data.
In short, flatbed truck usage is way up, despite the fact that flatbed truck freight rates have doubled.
The usage spans America’s industrial heartland, proving that a massive industrial/manufacturing resurgence is underway.
This is in contrast to previous freight booms on our coasts, which indicated that we were just importing more stuff.
Today’s boom proves that we’re MAKING more stuff – creating permanent jobs and improving productivity.
Much of this is driven by the “black swan” (something nobody saw coming) of AI, which is truly fostering an unforeseen boom, per Mr. Andrews.
The boom is here to stay, too, because America has an enormous competitive advantage over other countries in the form of cheap energy.
Booms are bad for interest rates because signs of economic growth push rates higher, like I mentioned above and like what happened today, as a strong jobs report helped to push rates higher.
This boom, however, will likely end up being good for rates because it, along with AI, is increasing America’s productivity (an extremely important metric).
Increased productivity means Americans make more stuff in less time – and that brings down inflation. This is what largely saved America from inflation circa 1995 – 2000, as tech enabled America to produce way more with less – offsetting America’s penchant for money printing.
This Is Great for Real Estate, No Matter What
When our economy booms, people pump out babies, move a lot more, feel more confident, and, as a result, buy homes a lot more – no matter where rates are.
See the second half of the 1980s, for example. The economy was booming, rates were around 10% – and the housing sector could not have been stronger.
The “Crash Bros” might take heed.
