Friday Update March 10, 2023

753 existing single family homes on the market today.  In line with what we've seen over the last few weeks and completely missing that spring rush of listings that we normally see.  Month to date we have seen 273 closings at an incredibly resilient median price of $455,000.  Same time frame last year saw 413 closings at a median price of $475,000.  This slow down in sales volume supports my point that the lack of inventory isn't due to a surge in demand but rather due to sellers' lack of ability or willingness to move.  Stagflation is what they call that.

This week has been pretty fun to watch.  J Pizzle, the head of the Fed, came out in front of congress Tuesday and Wednesday and basically got all Voelcker like.  He was all like listen up you peasant scum, we created this inflation out of thin air, y'all loved your stimmy checks, and now it's up to us to tame this very inflation that we created.  We's gonna fuck shit up until the job is done.  Something like that, that's roughly what the market heard anyway.  So last week we got a Fed president that basically made the stock market all giddy and happy and green.  And the FOMO was setting in and we were talking about having our cake and eating it too.  This week with just a couple hours of testimony Powell flipped the switch on that.

Unless you live under a pretty big rock you've probably seen some not so great economic news developing recently.  GM is offering most of their salaried staff to take a voluntary severance package.  I imagine the next step will be less voluntary.  We got some conflicting numbers about the number of job openings dropping which would normally suggest jobs are getting filled, but this was coupled with a .2% rise in unemployment.  So it's like maybe these job openings aren't so much getting filled as they're becomming unnecessary and going away.  So yo, unemployment at 3.6% is nothing to worry about at this point as it's basically in line with what we've seen for roughly the last 15 months.  But.  This metric is one that can change very, very quickly.  Numberpicture time.

You can see here that unmeployment rates tend to spike very quickly and recover rather slowly.  So just because our rate today is at 3.6% doesn't mean its not possible for it to double within a few months, or worse, or whatever, but certainly it won't go much lower that's a fact.

Now in addition to news of layoffs and some pretty mediocre earnings we now have news of the 16th largest bank in the nation failing.  Get this shit, in 48 hours.  Now if you look at the stock chart for Silicone Valley Bank it becomes pretty clear that problems were visible to investors probably somewhere around August.  The company's stock peaked like many others at the beginning of 2022 at over $700/share.  Together with the market the stock sold off aggressively until a small rally in August, entering September around $425/share.  This is a bank that much like it's name suggests did a lot of business with tech companies since the late 1980s.  As we all know many tech companies raped the PPP system for billions while attracting the investment of every Reddit degenerate that wanted to bet big on the next TSLA. I mean they played an integral role in the betterment of society by filtering what we get to say on social media and allowing for Zoom happy hours.   And valuations skyrocketed across the industry together with the holdings of this bank, SVB.  Then enter 2022 when rates start to climb and the bank decides that probably the worst is behind us and invests into 10 year government bonds at something like 1.8%.  Safe bet right?

Wrong motherfuckers!  Today the 10 year T note, after dropping 40 bps in the last couple of days, is at 3.7%.  So that means that you have depositor's cash that's sitting in underperforming assets.  People can park their cash into a place like Robinhood and get 4.15%, or they can go to a credit union and get a CD at 5%, meanwhile here is the tech centered bank getting 1.8% on a huge chunk of their holdings.  I wonder if maybe like Zillow or some piece of shit company like that which probably banks with them gave them the idea based on an algorithm chatgpt wrote that rates can't go any higher.  A seriously relatively normal decision was made by a bank on a scale so large that it wiped them the fuck out.  The 16th largest in the nation.  For perspective yesterday they were looking to hold a stock sale and rally up some funds, and today the FDIC took them over.  That is an incredible story, one I'm sure I'll be elaborating on more next week.

I want to take my son to the climbing gym and so I'm going to wrap this up by saying that we are just seeing the opening salvos now.  We're just now seeing the beginning of this whole bubble bursting.  We have had 12 years since QE1 and operation twist and a time in which accelerating money printing caused the bubble to grow gradually larger, and larger, and larger until we got to 2020 when we just went full blown unhinged with this shit.  And so now after just one full year of M2 money supply contracting we get to see the first real failures start to wash up.  

Guys, especially Realtors, if you're still reading this.  This is not the time to get fancy and start overspending on stupid shit.  I know a lot of you love to do it because your daddy didn't love you and other kids had nicer things.  Or whatever.  I could easily be wrong and if you listen to me now you're going to enjoy a productive period with a bunch of money saved up.  But if I'm not wrong we're going to see some serious deleveraging taking place and those car and house payments aren't gonna make themselves.  This isn't just for agents, live within your means, next week is probably going to be more chaotic than this with a crescendo on the 22nd of March when the Fed decides how much pain it wants to dish out on us peasants.

I love you.  I'm not making fun of you.  Just be adults about the situation cause this isn't a time to act childish, amigos.