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What Happened Last Week and What It Means to You: December 6st, 2022

Week Ending December 2nd, 2022

Initial jobless claims fall to 225,000Labor market seems solid.

What does it mean – The key takeaway from the report is that the low level of initial claims remains indicative of an otherwise solid labor market. The Fed is caught in a quandary. Wage growth continues as job market is still a bit tight. And continuing claims continue to go up. The number of people already collecting jobless benefits rose by 57,000 to 1.61 million. That’s the highest level since February. This could be the reason the participation rate has not budged. Still fewer folks working than before the Chinese virus shut down the economy.

 

Productivity decreases and labor costs continue to riseCost per unit continues to go up and job creators are paying far more to produce much less.

What does it mean – It is the first time since 1982 that there have been three consecutive declines in productivity. For the third consecutive quarter, the decrease in productivity and increase in wages means we saw per unit cost across the economy go up by 4.1%. Just one more issue adding to inflation.  

 

Consumer credit increased by $25 billion in SeptemberIt was revised up to $30.1 billion (from $23.8 billion) in August.

What does it mean – More Americans than ever are living paycheck to paycheck already, and many more are living off their credit cards thanks to inflation outpacing wage gains. Those excess funds from the government transfer programs are drying up and more and more Americans are using credit cards just to get by. 

 

Existing home sales down across all regionsNortheast (-6.6%); Midwest (-5.3%); South (-4.8%); and West (-9.1%).

What does it mean – Interest rates are driving prices down. Higher mortgage rates are taking a bite out of existing home sales, having created affordability pressures for prospective buyers and deferred listing decisions for potential sellers who see an expensive repurchase proposition.

 

Manufacturing downManufacturing activity contracted for the first time since May 2020.

What does it mean – Interest rate hikes, uncertainty, and increase in government regulation provide the trifecta that is adversely impacting manufacturing demand across the globe. The two charts below illustrate the dramatic slow down in manufacturing and the resulting layoffs. The Midwest has been shedding jobs for nearly 5 months.

Rent crisis breaks record…According to a survey by Alignable, 44% of Americans small businesses could not pay rent this month.

What does this mean – Small businesses are the backbone of our economy. Government regulation, the shut down, rising cost of capital, direct competition from government via wealth transfer programs, and rising minimum wage are just a few issues that are strangling small businesses across the country.

 

The Pareto Principal…In the below chart is another look at reality, one you are probably not seeing from the mainstream press or our government. Yet, it is the real backbone of our economy. It is made up of the men and woman who are willing to risk it all and who are struggling the most under the current policies that have led to this economy.

What does it mean – In this time of massive disruption, ever increasing regulations, higher taxes, rising fuel and energy prices, and record inflation, the spirit of the entrepreneur dominates the job-creation market.

Per the chart below, roughly 75% of all new jobs created are from businesses that employ less than 249 people and over 90% from companies employing less than 1,000 people.  Both could be considered small businesses. This is the incredible story of our republic and capitalism. From King Solomon who said, “there is nothing new under the sun.” (Ecclesiastes 1:9), to Pareto’s famous “80/20” principle, to the modern entrepreneur willing to risk all, human behavior is relatively unchanged.

Big business layoffs…Money manager Charlie Bilello posted a list recently, and the numbers are stunning:

  • Twitter is cutting 50 percent of its workforce (about 3,700 jobs).
  • Facebook is cutting 11,000 jobs–its largest round of layoffs ever.
  • Snap is cutting 20 percent of its workforce (1,200 jobs).
  • Shopify is cutting 10 percent of its workforce (1,000 jobs).
  • Netflix cut 450 jobs.
  • Microsoft and Salesforceare each cutting 1,000 jobs.
  • Robinhood is cutting 31 percent of its workforce.
  • Tesla is cutting 10 percent of salaried workers.
  • Lyftis cutting 13 percent of its workforce (700 jobs).
  • Redfin is cutting 13 percent of its workforce.
  • Coinbase is cutting 18 percent of its workforce (1,100 jobs).
  • Stripe is cutting 14 percent of its workforce (1,000 jobs).

What does it mean – Along with massive layoffs in the manufacturing sector, corporate America is catching up to the reality that rising wages, lower productivity, more uncertainty, increasing global issues, new green deal, rising energy prices, increasing global threats from China and Russia, border invasions from illegal immigrants from around the world in the USA, and Europe, rising taxes and increased government control are all leading to companies to take defensive positions. It never fails, everyone but the government gets to pay for the chaos created by our elected official.

 

Let’s roll America!! 

 

Doug De Groote, CFP®, MBA, CTC

Managing Director

805.230.0111 main

805.230.0061 fax

2660 Townsgate Rd Suite 450

Westlake Village, CA 91361

doug@degrootefinancial.com

www.degrootefinancial.com

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Michelle DeShields

Executive Assistant

Michelle is typically the first person you will speak to when we answer the phone. She manages the calendars and ensures meetings are booked. Michelle is a key member of our team by making sure you get to the right person and that the client experience is always exceptional and evolving to be better.

Fadi Ahmed

Chief Operations Officer and Chief Compliance Officer

Fadi works with clients to ensure an exceptional experience. He coordinates and assures the planning process and wealth management tools are at your fingertips to provide the clarity you deserve and the transparency and access to all your accounts. Fadi ensures the data and information is reflective in our planning software. All changes and updates flow through his desk and he coordinates those changes with the rest of our team.

Andrew Krout

Wealth Advisor, Co-Chief Investment Officer

Andrew Krout is a Wealth Advisor at De Groote Financial Group, LLC. He also serves as a Co-Chief Investment Officer for the firm, focused on wealth management.

Previously, Andrew served as CIO with Kelly Financial in Boston Massachusetts since 2013. He is a licensed investment advisor representative and insurance producer. He graduated from Saint Francis University with a bachelor’s degree in both finance and accounting. He is a candidate for CERTIFIED FINANCIAL PLANNER™ designation. Andrew holds life insurance licenses in Massachusetts, New Hampshire and Connecticut.

Andrew is passionate about serving his clients and investment management and how to apply news and current events to investment decisions. He played Division 1 golf in college, and still enjoys playing and watching the sport in his free time.

David Darst

Co-Chief Information Officer

David Martin Darst, CFA is an Investment Advisor to DeGroote Financial Group, specializing in asset allocation and product selection. Previously, David served for 17 years as a Managing Director and Chief Investment Strategist at Morgan Stanley Wealth Management, with the responsibility for Asset Allocation and Investment Strategy. He joined Morgan Stanley in 1996 from Goldman Sachs, where he held Senior Management Posts within the Equities Division and earlier, for six years as Resident Manager of their Private Bank in Zurich.

David is the author of 13 books, including bestsellers The Art of Asset Allocation, 2nd Edition (McGraw-Hill), and The Little Book that Still Saves Your Assets (John Wiley & Sons). He also appears as a frequent guest on CNBC, Bloomberg, FOX, PBS, and others, and has contributed articles across a variety of publications.

David graduated with a BA in Economics from Yale University, and earned his MBA from Harvard Business School. He has lectured extensively at Wharton, Columbia, INSEAD, and New York University Business Schools, and for nine years, David served as a visiting member at Yale College, Yale School of Management, and Harvard Business School. He is a CFA Charterholder and a member of the New York Society of Security Analysts and the CFA Institute. 

Doug De Groote

Managing Director

Doug is a Certified Financial Planner™ (CFP®) with an MBA in Financial Planning, and is an active member of the Financial Planning Association (FPA). Before establishing De Groote Financial Group, Doug founded the United Wealth Management division of United Capital. Prior to that, Doug was a partner at Crowell, Weedon and Co. He regularly contributes to a variety of financial and general media.

Doug’s passion, and what he believes, is that everyone deserves the opportunity; they deserve to have the freedom and responsibility to be pro-active in achieving independence and financial success.

Doug’s life is focused around his family, wife and three children, and making sure they get the foundation that is necessary for them to have the awareness of the opportunities that abound in our great country.

Doug helps increase his client’s awareness and success, to identify and take advantage of opportunities that present themselves and help protect them from some of the pitfalls or obstacles that are thrown in our paths. With regards to their financial circumstances, Doug helps his clients identify their goals, plan for various outcomes and manage their assets to help them make their vision a reality.