The report is that the U.S. is in better shape than the rest of the world economically.
Europe is a mess because of the war in the Ukraine. Germany, Europe’s largest economy, has its manufacturing stymied due to the costs of energy. Look out below…
In China the housing market is cracking, but interesting is that both China and Japan are suffering deflation and not inflation. Remember that deflation means or translates to excess capacity.
Then remember that commodities are priced in dollars, and that the dollar is increasing in value and purchasing power due to expected and anticipated higher and higher interest rates.
Fighter planes are specifically designed to violently maneuver and not just speed. Pretty much the FED has to stall the economy, but not crash the plane. I will remind everyone with the purpose to scare and terrify that Jerome Powell is not an economist really and professionally he is trained as a lawyer. How scary is that?
So imagine some one piloting a plane who pretty much has to do a Scully and land a passenger plane in the Hudson due to multiple engine failure due to bird strikes being sucked into jet engines. Pretty much a miracle has to happen because you do not have an experienced pilot in the cockpit. Are we in trouble?
Know that some reports suggest we are kinda gliding along in our approach for a landing and the descent towards the ground has established a glide path of sorts: 3/4 point interest rate hikes; although some analysts believed or thought a full one point rate hike would be more appropriate…
So we are still gliding along looking for a place to land, but we are starting to loose altitude… Know that the ground is coming closer, but perhaps we should not panic yet, and brace yourself for a possible and probable crash landing. The oxygen masks still have not been deployed, and since this is a passenger plane there is no ejection seat where one can “Punch-out.”
So back to the math, 30 year mortgages are now at 6%, but some expect that interest rates on a 30 year mortgage have to hit 10% to pretty much take down the housing market. Use this as a possible predictor of our glide path. We still have mucho altitude…
Now officially the DOW has dropped into a bear market. These are large cap stocks who normally do better in downturns and are generally the first to lift and go up in a recovery, but pretty much the DOW dropping into bear territory is like a flame out on the last remaining engine.
A 747 has 4 engines, but can still remain airborne and fly on only just one engine. There is an old joke where one engine fails, then another, and then the third, so basically this particular scenario is happening and the plane is flying on just one engine. Of course the pilot announces the slower airspeed with each engine failure will effect and delay the ETA, and know the plane has to cross an ocean, so no emergency landing can take place. One delayed ETA leads to another and then the third…
So some woman mentions, “I hope the fourth engine does not fail, because otherwise we will be up here all day.”
So here we are, but it is no joke.
Anyways, without saying the FED has to kill not only the housing market, but also the stock market to further kill the “wealth effect.”
”Look out below,” I say.
Don’t panic yet, still plenty of time for that, but I think already a crash is eminent. Hope you listened to the flight crew when they went through the emergency procedures.
Cal