Reminder: $500 of HOA dues can subtract as much as $75,000 of purchasing power – meaning a buyer could qualify for a $600,000 single-family home, but might only qualify for a $525,000 condo with $500 of HOA dues.
X is laden with opposite viewpoints, and I love it!
Stock Market: Crash or A Lot More Upside?
Raoul Pal and the rest of the liquidity/soft landing crowd (who insist that central bank liquidity will push stock prices higher no matter what) believe that stocks will continue to rise in response to a continued flood of liquidity (spending, rate reductions, QE) from central banks and governments.
Warren Buffett, on the other hand, is selling stocks like there’s no tomorrow and currently is sitting on a record amount of cash – “I wonder if he knows something?” (Ironically, Mr. Pal says “value investing” – like Buffett does so well – “is dead”).
Who’s right? No clue, but this is another reminder to stay diversified.
Bond Market and Interest Rates – Stagflation or Temporary Volatility?
There was panic last week, when rates were climbing “out of control,” as many analysts think the Fed cut way too much too soon and that inflation will return. Analyst Michael Gayed led this charge: The Fed has lost all f***ing control.
But, Jim Bianco (another analyst who thinks the Fed made a HUGE MISTAKE by cutting too soon) reminded us that the volatility we saw last week and today (rates fell sharply) should be expected prior to elections, Fed meetings, and bond auctions.
I saw other posts say that rates were shooting up in expectations of Trump’s victory (the much-heralded “Trump Trade”), but they fell today after a Harris victory became more likely.
Many analysts like permabear Peter Schiff think we’re heading full speed back to 1970s “Stagflation” – where we have both recessions and inflation at the same time.
And other analysts believe that investors worldwide are simply realizing that the U.S. can’t pay off its debts – and, as a result, are losing faith in Treasuries.
George Gammon and Brent Johnson both frequently remind us though that we have heard these claims MANY times before, going back to the 1970s!
But, investors invariably return to U.S. Treasuries because there is no alternative, and because the U.S. is less messed up than other countries.
Gammon also reminds us that both rates and inflation shot way up (inflation hit 5.4% in 2008) after the Fed started to cut in 2007 – so yes, we’ve been here before.
So, What’s Going On? Bifurcated Economy!
The labor markets, outside of government, are much weaker than we’ve been led to believe. And, the manufacturing sector is extremely weak as well.
So, while government jobs and assets prices are going strong, much of the rest of the economy is not – something I’ve been pointing out for some time.
And the Fed sees this and that is probably why the Fed is so likely to cut the Fed Funds Rate another 25 basis points on Thursday.
So, I am not sure where rates will end up, but George Gammon makes a very strong case for much lower rates next year – and that will be a topic of a future blog.
But, for now, expect continued volatility (rates up and down) – particularly if the election is contentiously contested (which I think is likely).
