Week Ending May 6th, 2022
Fed raises rates by .50%…Markets take wild ride.
What does it mean – While the Fed believes they can thread the needle, history has proven they are less capable when they bow to politicians. Volker proved this in the 80’s. The Fed has painted itself into a corner. Powell was more dovish than the market expected. He talks a good game, but the actions needed to shrink monetary supply and to decelerate liquidity at a rate that will actually slow and eventually reverse inflation. Based on last week’s speech from Powell, expect the fed to slow play this as they seem to less confident in a drastic move to curb inflation. Also expect more inflation, more rate hikes, and an increase in volatility. Bottom line, no fiscal policy and a Fed that is political equals more uncertainty.
U.S. Economy added 428,000 jobs in April…Yet labor participation declines from 62.4% to 62.2%
What does it mean – We have a lot to do and cannot afford to be bogged down.
While the economy contracted by 1.4% during the first quarter of 2022. There is still a bit over 10 million less people working today than before the ill-advised shutdown due to COVID. According to ABC News, in CA 1/3 of all the restaurants are permanently closed and nearly 1.2 million people in the CA restaurant industry had to find a new job or are still out of work. Nationwide the number is close to 500,000 restaurants closed according to Spectrum News One. According to Fortune Magazine, over 22% of all food trucks are gone – out of business and most likely will never come back as employment has shifted and going to the office is less desirable. Somehow employees are starting to call the shots.
Is Immigration and the help of your tax dollars driving inflation?…California is the tip of the iceberg.
What does it mean – The real question is, “is your government a charity?” Rent for housing and hotels are going to continue to go up in California and areas where the Federal Government is shipping immigrants from all over the world. Yes, we are the largest importer of labor and welfare cases in the world. In CA alone, 100’s of families from Afghanistan, Ukraine, parts of Africa, Asia, and Latin America are in hotels or apartments paid for by the American tax payer. If you are planning a trip to the “city” this summer, you will be paying more because there is a high likelihood that your government is housing refugees and illegal immigrants at your cost, driving up hotel prices and rents in many cities.
If you are looking to rent an apartment in Los Angeles, Orange County, and many other cities across the country, land lords are now requiring 3 to 6 months rent up front and rates have gone up over 11% since the Biden administration started to pay for housing for immigrants who are here without any ability to pay. I ask the question: What will this do to your property value in these neighborhoods? What will it do to the fabric of these communities when the government can no longer afford to house refugees and illegal aliens and simply leaves the taxpayers holding the bill? This is exactly what France, Germany, Holland, England, Belgium and others did. I can tell you what happened to those communities, but instead will encourage you to do the research. Our government is not a distributor of charity. You are!!!
I strongly suggest you read the speech by Davey Crocket titled, “Not Yours To Give”. Here is the link – https://fee.org/resources/not-your-to-give/
Real GDP decreases by 1.4%…Interest rates rising, money supply still overheated, and inflation is not transitory.
What does it mean – Inflation is not transitory, and it could exacerbate concerns about the U.S. economy being at risk of slipping into recession or stagflation.
Real disposable personal income down 19.9%…Down 19.9% year-over-year, marking it the fourth straight decline.
What does it mean – real disposable personal income declined 0.4% in March, which helps explain why the personal savings rate, as a percentage of disposable personal income, dipped to 6.2% from 6.8%. In other words, consumers were spending out of savings presumably to maintain their standard of living in the face of higher costs.
Existing home sales decreased 2.7% month-over-month in March…All-cash sales comprised 28% of transactions in March, up from 25% in February and from 23% in March 2021.
What does it mean – Cash buyers are rushing to states with lower taxes, fiscal responsibility, and less crime. Money is leaving states like CA, NY, NJ, IL and other poorly run states.
Lets roll America,
Doug De Groote, CFP®, MBA, CTC Managing Director
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