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I occasionally take a look at the if it bleeds it leads station; CNN. Today I was wondering if they'd be camped out with the Proud Boys looking for some action. Nothing there but I did come across this article which discusses an issue I've been discussing here for some time.
The dreaded return of student debt payments
Beyond the high cost of living, Bank of America said many younger Americans are also likely bracing for the return of a significant monthly expense: student debt.
The bipartisan debt ceiling deal included a provision that specifically prevented the Biden administration from extending the pause on federal student loan payments.
The student debt freeze, in effect since March 2020 when the Covid pandemic erupted, is expected to conclude by the end of August.
That is particularly painful to younger consumers. Americans are sitting on $1.6 trillion of student debt, according to the New York Federal Reserve, and the vast majority of that student debt is held by those under the age of 49.
For millions of Gen Z and Millennials, the return of student debt payments will mean less money for spending on restaurants and vacations.
Some consumers may be starting to pull back on spending ahead of that change, Tinsley said: “It’s coming down the tracks pretty fast now.”
Trump is stoking a J6 reunion in Florida tomorrow. The Proud Boys are organizing several events in honor of Dear Leader. In the meantime DT is having a problem lining up his legal team and may use that excuse to delay his hearing.
In better news, the two yahoos that hatched the 2020 multi-state robo-call scheme to intimidate black voters just got fined $5.1MM by the FCC. The judge ruled these two outstanding citizens had violated the 19th Century Ku Klux Klan Act. The boys must not be students of history.
From ChatGPT who's data set is now 18 months old:
Just posted on the WSJ a few minutes ago. Apparently no one cares about gaming in the new world where it's all about AI. There's no real change in MSFT share price.
As the author said; Altria is a value trap. They have one very successful product, Marlboro and they're massively over charging for it, which is a big reason their sales are dropping. At some point they'll have to do something else right, a skill this management team has never mastered. I owned MO for years but will not buy it again unless they have a viable new product rollout.
That said, as long as they own the exclusive right to sell Marlboro in the US, they'll continue to make money and MO will be a tax advantaged 8% bond. Anyone buying MO should keep an eye on dividend coverage. If they cut the dividend for any reason this could be a $30 stock overnight. The P/E is currently ~15X which is much too high for a company who's revenue is shrinking. A company whose product kills its customers has to recruit new ones. Marlboro is not the choice for Gen Z.
The markets should be quiet today. Tomorrow we get the May CPI report before the market opens, then the PPI report Wednesday before the market opens and after that we get the Fed decision at 2:00PM Eastern and JP speaks at 2:30. If the CPI doesn't wake the market up then Scary Jerry always does.
When you are the criminal class, destroying belief in the justice system is important if you want to control any society. See Russia, Putin and the KGB as a classic example.
I think it's hilarious that CA governor Newsom wants to charge DeSantis with kidnapping. I've a lot of issues with Mr. uber privilege but if he's the only politician willing to take a hammer to fascism, I can live with his indiscretions.
The WSJ is still one of the few papers an investor must read. He doesn't let his goofy friends like the all but senile Alan Dershowitz grace the news pages. The Dersh has let us know that his buddy DT can serve as president from prison. He's also OJ's good friend and fond participant in Epstein's enterprise. Of course so was Billy Boy Clinton. At least that cracker never tried to overthrow democracy. Thankfully Rupert likes money more than he hates democracy.
Barron's is arguing this weekend that the longest bear market since 1948 has ended. I'm not convinced as I still continue to collect ~5% cash. As much as all the pundit class was negative in January, they're happy today. Makes no sense to me.
These people are not mentally disturbed. They are clear thinking fascists who despise the messiness and goals of democracy. Although much more bright, our 2nd president, Adams, was also a fascist. Jefferson, as flawed as he was, believed, like Washington, in democracy.
Like Jefferson Davis, Trump and Lake are anti-democratic fascists. Given the chance, they will overthrow democracy to gain their own power. Lake is calling for the overthrow of the US government. She's a traitor. I would call her a confederate style traitor but at least they believed in something; slavery. She's more of a Hitler who only believes in power. Trump is the same. They would burn the US to the ground only to own the embers.
While we wait for PCI and PPI reports this week I'm beginning to track PCE more closely, (Personal Consumption Expenditures). You can track that here on the BEA site. It can also be tracked on FRED.
https://www.bea.gov/data/personal-consumption-expenditures-price-index
PCE as reported through April is still robust at an aggregate of over 4.75%. It's fallen to 4.3% in the last two months but still nothing to be concerned about. I'm looking out 6-12 months and I'm concerned that the cost of borrowing will begin to show up as a fall in PCE later this year. That is, high interest mortgage debt, student debt and revolving credit debt. All are much higher than they were a year ago and student debt has been on hiatus for three years while it compounds daily.
I was able to do some on-the-ground research this weekend as we had an open house for our current residence. Our realtor managed the main house while I worked in the guest house, (locally referred to as a casita). The most interesting conversations were with millennial couples. Some just starting out and others with a starter home and a couple of kids who want to move up and closer to their kid's schools. Uniformly they've gotten beaten up by all cash Boomer offers from CA and TX. It's only been two days so we'll have to wait and see if any younger families step up. A couple of them heard horror stories from their parents about the 1970s when rates kept moving up to 18-20%. After these conversations I've decided that you can no more rationalize an explanation regarding the '70s than you can tell a Christian that Noah's flood was simply ice melting from the last ice age. Interesting times.
I've spent half my career as an outside expert consulting with various companies and organizations. That type of work may be on it's way out
Wanted to be king, only rose to count. But hey; he did it 37 times. That's got to count for something..:)
The bears still have some life in them. The market opened up this morning but the bears dropped it back below 4,300 again. It was either Barron's or the WSJ that called this week's market action "lackluster". It looks to me like a market that wants to break out but might be waiting for next Wednesday to understand where the Fed is with regard to interest rates. Have a good weekend.
Now cry for me Argentina
My Dos Mil is only worth once
For non Spanish speakers once is pronounced own-say.
Now you can sing it..:)
When I buy mining/materials companies I like RIO, (14% dividend), VALE, (7.4%) and BHP, (9%). I'm a bit too concerned about the consumer economy for the rest of 2023 to invest now but in the past these have worked well for me.
I agree with Nick. A CD is an inflexible tool best suited for a short term hold unless one has a specific reason for laddering longer term CDs.
Here are some other ideas:
https://money.usnews.com/investing/articles/whats-the-best-treasury-etf-to-buy
I'm in the one more down cycle camp. There's too much upcoming pressure on consumers which will likely lead to lower earnings. One of our kids bought a home this year. As we did in 1980 with our first home; they've stopped going out to restaurants, the vacation this summer will be working on the house and while Ikea may get some business there won't be much in the way of extra purchases. Other millennials will be busy paying back student loans.
On the bright side, oil is still in backwardation but that may just be because the industry sees a downturn coming.
Republicans in Congress are working on a very important bill to ensure gas stoves receive the respect they have earned. Florida representative Jared Markowitz, Dem, Florida has suggested a few amendments to the bill to ensure, maybe I should say enshrine, the great gas stove.
1. Create a six burner double oven for statuary hall.
2. Create a position in the US Dept. of Energy - Supreme Allied Gas Commander.
3. Rename the bill the Make Appliances Great Again bill. All of the bill's supporters already have the hats, shirts and yard signs.
The SPX flirted with 4,300 this morning. Tech is the only sector down this week as energy leads.
OT: The new mini editor has a bug. When your screen refreshes it deletes your text. Feature or benefit?!
As long as a bank is FDIC insured I don't worry about it. I'm just looking for the best rates. You should keep your CDs at or below $250,000 per institution. That way you're fully insured. My mother had money at Washington Mutual when they went under. It was in limbo for a bit until JPM took it over and sorted out accounts but no problems recovering the principle.
Bankrate is a site I use weekly to check mortgage rates and other banking related subjects. Here's their list of banks rated by how safe and sound they find them to be.
Bankrate Safe & Sound Rating
Also don't forget to look at munis and other bonds that may give you more flexibility.
Mother nature has a sardonic wit.
WFC.A 6.3%, BAC.L 5.7%, JPM.O 5.4%, MS.O 5.6%
I also own Schwab J, Fifth Third K, Metlife F, Public Storage K, Allstate C, Southern Co, AT&T A & C.
Each is roughly 8.33% of my preferred account. Average return for all 12 5.6%. This is down from 5.7% earlier this year.
With PFF, investors should be willing to take on exposure to regional banks. For now my preferreds are all with the too big to fail banks like JPM, WFC, etc.
I'm a bit disappointed that Wokey doesn't have white knee high boots.
Thanks again Elroy. It's easy for us non oil-business professionals to assign various cause/effect scenarios and focus on the raw product and not the cost of finished goods. The 2nd graph makes a strong point. I'll have to see if I can find something similar on FRED so we can have an updated version.
I had posted this comment in response to a comment by Court over on Dew's board and thought it may be more appropriate here. This is my base case argument for moving to fixed income over the last several months.
Ms. Market is like Mike Tyson...everyone's got a plan until she punches them in the mouth..:).
With interest rates up, bonds and like products are back in favor. Advisors are dusting off the 60/40 allocation. In my experience, this does not portend the return of a bull market.
One basic metric I use is market P/E. In the past we considered ~15X as fair value on the SPX but since the fast growing tech giants have become such a large part of its overall value it's more like 20X fair value with a top between 24-25X. Of course, during or coming out of, a recession the P/E is skewed upward, sometime dramatically.
Looking at the peaks at the end of 2019 and 2021 and comparing it to today's market, I see similar issues with regard to P/E and in today's case a less solid economic argument for P/E growth. The SPX P/E peaked at 24.4 in December of 2019 and an even higher 27.3 in December of 2021. After Friday's close the current SPX P/E is 24.8. Could it move higher? Of course. Given the outlook for earnings over the next two quarters, is this fair value? In my opinion, unlikely.
Appreciate your expert opinion Elroy.
Ms. Market is like Mike Tyson...everyone's got a plan until she punches them in the mouth..:).
With interest rates up, bonds and like products are back in favor. Advisors are dusting off the 60/40 allocation. In my experience, this does not portend the return of a bull market.
One basic metric I use is market P/E. In the past we considered ~15X as fair value on the SPX but since the fast growing tech giants have become such a large part of its overall value it's more like 20X fair value with a top between 24-25X. Of course, during or coming out of, a recession the P/E is skewed upward, sometime dramatically.
Looking at the peaks at the end of 2019 and 2021 and comparing it to today's market, I see similar issues with regard to P/E and in today's case a less solid economic argument for P/E growth. The SPX P/E peaked at 24.4 in December of 2019 and an even higher 27.3 in December of 2021. After Friday's close the current SPX P/E is 24.8. Could it move higher? Of course. Given the outlook for earnings over the next two quarters, is this fair value? In my opinion, unlikely.
We had talked about this earlier this week. Here's the article from Barron's. OPEC may cut production this Sunday but if not, prices will most likely continue to fall. The front month contract is up about $3 above the bottom earlier this week but contracts out a decade from now continue to fall marginally. It's not a good sign. It simply means travel is holding up and likely will through the summer but the long term outlook isn't as rosy.
OPEC’s Next Move Unclear as Oil Prices Drop
Oil prices are near their lowest levels all year, reflecting a drop in global demand. What is ahead has investors on edge—and they are betting OPEC and its allies, OPEC+, won’t come to the rescue by cutting production when they meet on Sunday.
If investors are right, oil prices—and stocks—could be in a rut all summer.
Since October, OPEC+ has reduced production by 3.5 million barrels a day, a sizable chunk of the roughly 100 million barrels that the world uses in a day. Nonetheless, the price of Brent oil , the international benchmark, has fallen from $83 a barrel before the October cut to Wednesday’s $72.78, less than 1% above its 2023 lows.
And oil stocks are falling too, with the Energy Select Sector SPDR ETF (ticker: XLE) dropping 8.6% in the past month. Exxon Mobil (XOM) is down more than 10% in the past month, even after reporting better-than-expected earnings and progress on its projects.
The main problem has been that demand has been falling. China’s rebound from Covid restrictions hasn’t been as strong as some analysts had expected, and economies are sputtering in other parts of the world.
The other problem stems from evidence a key country in the alliance isn’t adhering to announced production cuts.
Russia, which is part of OPEC+, has said it is reducing production by 500,000 barrels a day in retaliation for sanctions related to its invasion of Ukraine. Shipping vessel data tracked by Bloomberg indicate that Russia’s crude production hasn’t fallen off—in fact it appears to have risen. That raises the prospect that Saudi Arabia and other major oil players will press Russia to actually reduce production, which itself would be tantamount to a new cut.
But RBC Capital Markets analyst Helima Croft doesn’t expect other OPEC members to get into a dispute with Russia over production. The last time that happened, in 2020, a supply glut led to prices dropping fast.
Croft writes that OPEC has an incentive to cut production more and prop up prices, and she thinks it is more likely than not that they will. The fact that OPEC is meeting in person—as opposed to remotely—is a sign that they are predisposed to make a more active decision, she writes.
It is also clear the market isn’t betting on that outcome. Eventually, OPEC’s hand may be forced regardless—though it could take even lower prices to force the cartel to get more aggressive.
“The oil market is not pricing in additional OPEC production cuts, but ironically, the lower prices go, the more likely OPEC will be to announce a cut,” writes Raymond James analyst John Freeman.
Prior to the pandemic the SPX reached ~3,400. Everyone thought the market was overbought and due for a pullback. Then we got the pandemic flash bear. By the end of 2022 the SPX was up over 40% - above 4,800 because the government had injected so much cash into the system through outright helicopter Ben'ing cash to the populace, allowing people to stop paying rent and sometimes mortages, stopped student loan payments and zeroed out the cost of borrowing. Those days are over and it will take longer than must of us think for the system to rebalance. To my mind we're close to fair value here with a top of around 4,600.
Attached below is a chart everyone should be familiar with by now. I've been saying for a few weeks that lack of volatility always leads to increased volatility and we finally saw a breakout today. Top pane, PPO is just beginning to show positive momentum. Second pane, RSI is not yet oversold but Bollinger bands have been breached. So even though everything except BB looks positive I never expect a market to continue upward in the short term until we're back trading within the bands again. The bias is clearly upward but we may still be flat to down on Monday. Enjoy your weekend.
DISH, the red-headed step child of communications is just happy to be noticed.
Tighten up the truancy laws, call it home school. Job done..:).
As if times haven't been tough enough for T and VZ, AMZN says they want to get into the wireless business. Hello.
This is a good move. The first trial was set to start next week.