Economic snapshot; U.S. home prices and the market outlook

U.S. house prices in comparison to the rest of the world

Most housing markets in the midwest U.S. offer some compelling value for both landlords and homeowners. When compared to local income levels, these markets are the cheapest in the world.

Is there any upside potential left for investors and landlords?

Note to reader: Toggle down to the bottom sortable table to look at which cities in the United States still offer investors with some sound pricing opportunities. I get asked this often. Hint: The largest SFR REITs are concentrating in those areas.

 

National U.S. House price to household income multiples over time have been creeping higher, but are still lower than elsewhere around the world.

Note: Click on each header to sort (ranked by price to income multiple)

Some insights

There are some areas in the U.S. that have gotten ahead of themselves. While they may be wonderful areas to live, it seems the competition is already fierce.

Despite what the MSM and alt-media are proclaiming, house prices in the United States are still a relative bargain when compared to the rest of the world. Although house price to income multiples have been creeping up since the bottom of the housing bust that resulted from the Great Recession, the data are still low when compared to the other developed nations.

House prices when compared to local incomes vary greatly from city to city

The SFR institutional money is fully aware of these results, and that’s why they continue to add to their SFR portfolios.

As for my analysis, we currently have a bifurcated global housing market; American house prices, capitalization rates, and rent yields are still superior to the other Western nations. Until these values converge in any meaningful way, I look for U.S. house prices to remain firm. I cannot definitively conclude this with regards to any other nation.

I have been predicting that the U.S. price data would continue to climb and converge with the rest of the world, but house prices in all areas are rising as well when compared to disposable income. Thus, many areas in the United States still offer investors a few compelling opportunities, and this is why the larger investors are still addin to their portfolio holdings. Although the easy money has already been made, there is still some left for prudent long-term investors. If any opportunities arise in the future, I may add to holdings as well. As of now, I am paying down debt and deleveraging on the margin.

Many cities in the Northeast offer investors some decent value as well.

Please note that there may be differences in the values of particular cities listed in the table below with their corresponding values in the charts above, and this may be due to variances in methodologies, including the specific geographic areas of the city, particular housing stock, as well as how annual incomes are measured. Takes these values as estimates, but you can see how some areas are still very reasonably priced.

Note: Click on each header to sort

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81 thoughts on “Economic snapshot; U.S. home prices and the market outlook

    1. Thanks for this article.

      If investors think Canadian housing still makes sense at 2% cap rates and 8-9x household income, what does that say for American housing, whose cap rates are about 5% and are 4.5x income?

      The cap rates may seem low, but with 9% inflation, a 5% cap rate based on purchase price becomes an 8-10% cap on the same purchase price and rent increases in 4-5 years.

      Institutional investors know what social largesse does. They read my articles.

    1. That’s a comprehensive article. It says a lot. Here is something to contemplate; I bet a big chunk of this developer’s money for Canada is foreign sourced. While the single family Chinese guy is hindered from it investing directly, the large institutional money from all over the world buys up instead.

      Although the news and business articles are overwhelmingly bearish on the housing sector, circumstances are still unfolding contrary to the consensus outcome. As long as QE is in effect as a monetary policy tool, it’s hard to stop a trend.

      Of courses, I can only endorse American RE as the numbers here still make sense on a relative basis, but that’s little comfort for Canadians looking to buy. The prices up north are mind blowing. If the same ratios applied to the US, the median house price here would be about 600k.

      But, with the Canadians high cost of everything, especially housing, they get “free” health care. Like I said, nothing is free.

  1. It occurred to me (after getting some fishy answers from a new customer) that many companies may be experiencing financial issues because of interest rates going up? This quote is taken from the 2018 article below:

    “Yet elevated levels of debt will also make businesses vulnerable when the next recession strikes or if borrowing costs spike because of rising interest rates. Either outcome will make it harder for Corporate America to pay back the $4 trillion of debt coming due by 2022.”

    ………..And here we are in 2022.

    I’m concerned about extending NET 30 terms to new customers because that can lead to stalling when it’s time to pay the bill or just outright default. So far I’ve had some really interesting excuses. New customer with the “fishy excuse” noted above, who is an established operation, says the reason their check bounced is because the controller did not realize the check was written on a checking account that just closed. I made my point politely clear and payment is on the way (supposedly). On advice from a friend who has done business with them, he told me to make sure you get paid or advise NET 30 terms in the beginning. So here we are. They paid approximately in 30 days but the check bounced. Like I said. Fishy. And perhaps a clever way to get the NET 60+ they may want.

    Another claimed they did not receive my invoice, which is possible, but the PO was issued and they likely got a reminder to pay in 30 days.

    So just on a hunch I put the phrase into google (Large companies running on cheap money failing) and came up with two articles that seem to suggest things are not as good as one might suspect. If any one of these companies took covid money to keep running perhaps there was a catch after all? Some say it does not need to get paid back if it was used to pay employees. I never looked into it as I didn’t want to touch a dime of what I call dirty money.

    From 12/2021
    https://blogs.imf.org/2021/12/15/global-debt-reaches-a-record-226-trillion/

    This one is from 2018 so pre-pandemic but still telling the same story.
    https://money.cnn.com/2018/02/26/investing/corporate-debt-rising-rates/index.html

    One of the companies I started to do business with recently purchased a local operation and expanded so they are probably dealing with lots of redundancy, which means spending way more money than they need to. And probably bought that smaller local company with cheap money that is going to become very expensive soon?

    1. Interesting observations. I have to believe your anecdotal observations are accurate for a big chunk of the businesses out there. Most of the COVID-related vacant leased space for small businesses around my area is still vacant. Several restaurants have gone out of biz in the past 12 months, subsequent to the reopening. Many business customers are still having difficulties and higher rates are hitting the marginal players harder.

      There will be an ongoing shakeout for smaller businesses. These circumstances only really help consolidate power in each sector.

      Some businesses out there can’t handle the sharp increases in wage and input inflation. Higher interest rates are secondary. Only large firms can. I would be careful about extending credit to anyone.

      I am keeping a realistic perspective on overall debt levels. While nominal debt levels are rising, the real burdens are holding okay given the sharp increases in price inflation. Creditors are losing out from the losses from inflation risk.

      If I were a corporate manager, I would prefer to take advantage of low real interest rates and inflation, and raise capital via debt rather than equity. The firm would payback with ever softer and cheaper dollars. Borrow at 5% while inflation is close to 10%.

    2. I would say your hunch is correct. Business rolls smoothly on 30 days, anyone who wants to run outside that should be suspect. There could be many reasons to delay on the customers’ side from honest mistake to dishonest intent – none of which are your problem because you just need your bill paid on time. I worked for a large company and had cheque signing authority, we would regularly select who got left out in order to meet certain goals. When times were tough and cash flow was light, services and MRO were always paid last. It caused pain, I am happy I left that life.

      If this is an account that is worthwhile and you want to keep it, one thing you could consider in future is penalty/bonus terms in addition to your NET30. Something like 2% NET10 days as a discount with 2% interest on balances over 30 days. Corporate accounting always takes the discount – if they don’t then you are likely dealing with a shakey company.

      1. KenS and Chris:

        Thanks for your thoughts and advise. I will be more aggressive to offer NET 10 2% and see if that generates excitement on the part of the customer. Some customers I have are built in NET 60 and they are huge companies and there is nothing I can do. I just don’t offer any discounted pricing and it seems to work. To them adding 2% to the repair bill is nothing. They are happy to get a pump that runs well and doesn’t fail in a short time.

        While much of what is discussed here is way over my head I make observations and try to connect dots. If outright covid didn’t kill a large enough portion of the small business sector then a slow death by inflation and rising up front costs for business will help finish that sector off.

        I’m in a very unique field and repair equipment that the general public does not know exists. It’s possible because of that unique niche I’m still around. Our reputation for quality is also very good so that helps. If we don’t get the business now we will later. If we had the business and lost it because we are not high volume, we get it back after the hack repair shops cause bigger losses for the end users. We eventually get the work but we are only two people so can only process so much.

        Since 2009 Atlas Copco bought up some major players in the industrial high vacuum world and now owns two major OEM brands. Another major high vacuum company bought out another well established OEM. Out of four different major companies and two or three medium sized independents (who were competing with the OEMs); two of the big fish now own the majority of the market if not all of it. My closer competitors are the medium sized independents but I get failed pumps with their stickers quite regularly so I’m not worried. My guess is I’m so small I don’t even show up on the big fish radar. It seems staying small has allowed me to weather the storms of late but I wouldn’t turn down a good chunk of change to buy me out!

        Right now I’m building up an inventory of exchange repairs and will offer them at a premium price with no waiting. I’ll try to get maybe 10% more per repair. If they want to wait that’s fine. It all depends on how bad their customer wants the equipment running.

        1. Repair exchange is a great idea, awesome for customer service and has an added bonus of liquid finished goods inventory for the balance sheet.

            1. Repair exchange – send in broken unit and buy back rebuilt unit for fraction of new cost. Auto parts industry has been doing this for years with starters, alternators etc.

              1. Oh. Makes sense now. Especially given what AL said. AL can keep going as he provides a specific niche that can’t be easily filled and replaced.

                I’m sure if I followed AL around I would understand what he specifically does, but he can operate under the radar and make some good money. How many understand it? Not many. His niche is important, too.

                1. Yes, KenS got it. Many of the pumps I repair can easily be exchanged since they are basically the same. I’ve been doing it for a long time and largely it works but during the covid years I have been involved in buying a small building and remodeling said building, then selling that building and upgrading to a larger one, which also needed some work. Not many pumps got built and now I’m playing catch up.

                  The good news during the remodel, pump work was practically non existent because labs shut down or went to half capacity and that allowed me to do the remodeling myself (saving money). The bad news is I spent a fair chunk of change remodeling the building. The good news is I did not take any loans since I had the cash and my residence has been paid off for years. The replacement building was a 1031 exchange and was paid for by the proceeds from the sale of the smaller building (otherwise I couldn’t afford to upgrade). I only have about a $250K loan against my investment account where the interest income pays the loan, so no cash out of pocket on a monthly basis. The business pays me rent at cost but currently that goes to rental space where I have machine tools.

                  So hearing all this noise about inflation and rising interest rates, it’s possible my competition may be having problems staying in the game, especially for those who do substandard work and have taken loans to expand or whatever. As Chris says, living below ones means helps out in the long run. That philosophy has also helped me do some very valuable R&D on the pumps while not being pressured to ship a pump that was not quite right.

                  The pumps I rebuild are on instruments that are connected with semiconductor production, bio analytical instruments, high tech coatings and all kinds of scientific experimentation. They are called turbomolecular pumps or turbo pumps. I’m hands on with nothing more than a HS diploma and spent most of my early years making my car go quicker, which continues to this day. In 1991 I walked out of a grocery clerk position, which I held for about 7 years, and into a national laboratory as a tech assistant working on a particle accelerator, eventually working up to more complex tasks and problem solving.

                  It’s been quite a ride and I’m very fortunate. Just jotting all this down right now made me realize again how fortunate I am. Glory be to God!

        2. I was just reading your last post. I couldn’t respond as it was too far down the thread.

          That’s amazing that you can do that. I couldn’t. I don’t have those talents. It’s interesting hearing about other people’s endeavors and how they make money. You also handled the real estate transactions well, working up the scale and deferring cap gains. And yes, we live below our means.

          Glory to God, indeed.

  2. You still around?

    You may be right. Oil is falling and stocks are climbing. S&P moving up towards your target.

    1. I get a feel for the chart and market action. I’ve been doing this for so long.

  3. UST continues to lower borrowing needs for next fiscal quarter.
    ————–

    Quarterly Refunding Statement of Assistant Secretary for Financial Markets Josh Frost
    August 3, 2022, 8:30 EDT

    https://home.treasury.gov/news/press-releases/jy0908

    WASHINGTON — The U.S. Department of the Treasury is offering $98 billion of Treasury securities to refund approximately $54.1 billion of privately-held Treasury notes and bonds maturing on August 15, 2022. This issuance will raise new cash from private investors of approximately $43.9 billion. The securities are:

    A 3-year note in the amount of $42 billion, maturing August 15, 2025;
    A 10-year note in the amount of $35 billion, maturing August 15, 2032; and
    A 30-year bond in the amount of $21 billion, maturing August 15, 2052.
    The 3-year note will be auctioned on a yield basis at 1:00 p.m. ET on Tuesday, August 9, 2022. The 10-year note will be auctioned on a yield basis at 1:00 p.m. ET on Wednesday, August 10, 2022. The 30-year bond will be auctioned on a yield basis at 1:00 p.m. ET on Thursday, August 11, 2022. All of these auctions will settle on Monday, August 15, 2022.

    The balance of Treasury financing requirements over the quarter will be met with weekly bill auctions, cash management bills (CMBs), and monthly note, bond, Treasury Inflation-Protected Securities (TIPS), and 2-year Floating Rate Note (FRN) auctions.

    PROJECTED FINANCING NEEDS AND ISSUANCE PLANS
    Since the May refunding, Treasury has continued to receive information regarding projected borrowing needs, including an additional quarter of tax receipts and clarity on the timing and pace of redemptions of Treasury securities from the Federal Reserve System Open Market Account. Based on this updated information, Treasury intends to continue reducing auction sizes of nominal coupon securities during the upcoming August – October 2022 quarter. Treasury believes these reductions announced today leave Treasury well-positioned to address potential changes to the fiscal outlook. Depending on future developments in projected borrowing needs, Treasury will consider whether adjustments in future quarters may be appropriate.

    Treasury plans to address any seasonal or unexpected variations in borrowing needs over the next quarter through changes in regular bill auction sizes and/or CMBs.

  4. A timely article from the Guardian, a mainstream outfit. Russia, Inc. and USA, Inc. both going at it as the world realigns for the final conflict.
    ————–
    The rouble is soaring and Putin is stronger than ever – our sanctions have backfired

    https://www.theguardian.com/commentisfree/2022/jul/29/putin-ruble-west-sanctions-russia-europe

    Western sanctions against Russia are the most ill-conceived and counterproductive policy in recent international history. Military aid to Ukraine is justified, but the economic war is ineffective against the regime in Moscow, and devastating for its unintended targets. World energy prices are rocketing, inflation is soaring, supply chains are chaotic and millions are being starved of gas, grain and fertiliser. Yet Vladimir Putin’s barbarity only escalates – as does his hold over his own people.

    1. I have no idea about repos, isn’t this to replace part of the amount they took out? Can they use these funds to prop up the market like they did back in 2020?

      Many of the ER’s this week were pretty good. They released the fuddy Walmart news first, but everything else held up, I don’t hold thru earnings but probably should have. The dollar looks to fizzle out so PM’s should start doing well. High shorted, low floats seem to be inplay. POT stocks may get a boost from decriminalization news, we know they want everyone drunk and high. States that have legalized it are making fortunes.

      1. That reverse repo money is extra cash earning near Fed funds rate at the Fed.

        According to the Fed, it’s earning 2.30% over the weekend.

        https://www.newyorkfed.org/markets/data-hub

        This money could be used for anything and I assume it’s money sitting on the sidelines as well.

        WMTs problem was that their inflation risk was causing earnings to fall. Top line I think was actually good.

        Earnings looked good this week overall.

        I have to suspect that Powell said the Fed was at neutral policy during the press conference on Wednesday to help bleed air out of the dollar. I honestly thought he wasn’t going to say that until the next meeting. That’s why I went nuts.

        The downside is that energy prices received a bid after the dollar lost out after Wednesday afternoon.

        As for pot stocks, and growth stock will be supported in this change in Fed rhetoric. Anything that points to lower interest rates and bond yields over time will definitely be growth stock supportive. Take a look at the solar stocks and EV stocks. Anything growth like PLUG will shine here. But the reversal could change if the Fed changes it’s mind.

        1. “Take a look at the solar stocks and EV stocks. Anything growth like PLUG will shine here. But the reversal could change if the Fed changes it’s mind.”

          Looks like the Fed’s dancing partner is POS Manchin and his renamed Green New Deal
          https://theconservativetreehouse.com/blog/2022/07/27/joe-manchin-and-chuck-schumer-strike-a-deal-370-billion-for-green-new-deal-energy-transition-tax-increases-to-pay-for-it-and-more-irs-agents/

          ““The Inflation Reduction Act of 2022,” would “fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030.” Moreover, as part of the agreement announced Wednesday, Schumer and Speaker Nancy Pelosi agreed to pass legislation governing energy permits.

          1. I just read your link. I only saw the Bloomberg article on this bill. Bloomberg leaves a lot out. But it says they are working with oil companies. The Exxon CEO is controlled opposition. But then again, I guess many oil firms will transfer overseas over time as the US becomes more openly hostile, like it has to big tobacco.

            “Exxon CEO Loves What Manchin Did for Big Oil in $370 Billion Deal” Bloomberg

            https://www.bloomberg.com/news/articles/2022-07-29/exxon-s-woods-calls-manchin-bill-step-in-the-right-direction

            What I find amazing is how people still vote for these people while they get financially f’d directly by their policies. Before I became washed, I voted for democrats, but the democrats today are so much worse. God help us if Trump gets the Republican nominations. Four more years of Marxist destruction.

  5. A straight-up guy who clinically died in the late 1970s is still alive today and gives his hell testimony, and explains what matters.

    https://youtu.be/kkncKxj83yA

    Whatever we’re appointed to do, make it for the Lord. Some are evangelists, some are healers, some are teachers, some are prophets. Whatever you do, make it for the Lord.

    1 Corinthians 12:28 KJV
    And God hath set some in the church, first apostles, secondarily prophets, thirdly teachers, after that miracles, then gifts of healings, helps, governments, diversities of tongues.

    These two gentlemen do not understand what we know. That’s not their place. They have other purposes. I hate the adversary and know how his servants operate. I hate when unwitting people are taken in by liars and the disingenuous. I take exception to those who take advantage of less knowledgeable and insightful people.

  6. Personal income, employment costs, and PCE data all come in hotter than expected.

    Not good for today’s trade.

    CNBC Leisman shilling more open borders to bring down employment inflation and labor shortages.

    Own assets and don’t earn wages. Be the landlord.

  7. Residential real estate in Nor Cal is showing price drops all over the place. What sold in days a few months ago has turned to being on the market for a couple of weeks or more. Offering way above asking prices was the norm but maybe that is only reserved for the best of the best properties now. I’m seeing price cuts all over the place.

    I theorized – and perhaps communicated my thoughts on this site – that the recent “pay over asking” and sell in days was based on people legitimately qualifying for these loans. They have the money. The loan officer sees the W2s and says you can afford the grossly overpriced home. But my point then and now is are these legitimately qualified people getting paid far more than they should? The income and bonuses from the tech industry is perhaps in a bubble. I’m now seeing reports exactly what I theorized a few months ago that the gravy train may have ran out.

    Are we headed for another 08 style massive round of foreclosures paving the way for Blackstone or other real estate investment trusts to buy up all the single family homes that were sold during the “work from home” covid craze?

    I personally know at least one person who moved way out of the area into a place that was not a downgrade. Although he may be just fine; how many people figured the tech money spigot was going to stay on and bought more than what would normally be a reasonable price vs. time frame? Nothing should go up that much in a couple of years much less pay $70K over an already inflated asking price. The buyer’s rationale (with help from the real estate mafia) is the $70K difference in price is nothing when stretched out over 30 years. I think the people got hoodwinked and I am thanking God that my recent measly offers got overlooked.

    There is a fixer house coming up in a good area that I will try to get and not pay that much over. Maybe $10K. My condo will net me about $550K after I pay the real estate mafia. The house can possibly be had for low $600K. The difference in price will allow me to get rid of my storage space and HOA payment. It’s a house in a good area with long term benefits that my condo can’t offer (no rent restrictions, etc..).

    The way I see it I’m playing with house money. Whatever the gains are on my paid off condo will simply get rolled over into a better investment. But if this does not happen I will still thank God because he knows better than I what’s good for me.

    1. Steve Liesman on CNBC explains that many economists are shilling for open borders and what he considers as legal immigration.

      Any drop in price on residential properties will not be everlasting as this nation is no longer building ANY working class real estate and the populations are busting at the seams.

      If you want to have a multicultural kingdom where every race, color, philosophy, religion, gender, sexual proclivity is vying for exposure you want to be the landlord. Let the heathen rage and you make money.

      We can’t stop the massive waves of non-Christian and stupid idiot immigration. Let all the antichrists come in with their Krishna philosophies. We can’t stop the flood of poison, but if you’re the landlord you can stay ahead while the heathen rage.

      On an individual basis, I interact less and less with people, because I feel sorry for them. I’m marvel that they still work and that they make very little money from it.

      The Establishment wants us to stop using the word slave, not because it has a derogatory tone with black people; it has all to do with keeping the people from figuring out that they are all wage slaves, regardless of background. Blacks should rejoice, because now every worker is a slave. Eventually, the worker accomodations in the states will be wire cages like in Hong Kong.

      1. We interact with people through the course of normal business. The common complaint among the people we interact with is that they can’t find anyone to fill positions. We ask them where they think everyone went, they don’t know. Restaurants, Food production facilities, warehouses, lawn service, construction/trades. I just got the survey for a property we took possession of 7 months ago, our notary says it seems like nobody is working anymore.

        What is everybody doing? I suspect a lot of people are ill and nobody is talking about it. In my extended family and small circle of friends I am starting to hear about sudden onset cancers, tumours and burst ovarian cysts in three cases.

        1. Great point. Lots of disabilities and sudden onset death. I see it personally in my circles. Don’t tell them it’s a bioweapon coupled with the death jab.

          Though I don’t have any hard evidence to indicate this, I have to assume you’re point is valid. This is why the mainstream business shows are shilling for open borders. They’re being told to say this on some level. As the natives die, they are replaced with foreigners.

  8. Many sad sacks predicting gloom for the housing market. Not as long as rents remain elevated. Even if rents do not rise over the next year, house prices in the big bad collapsing US of A will rise and the people will cry manipulation and blame Obama. But monetary, local government, and fiscal/tax policies are to blame.

    The housing inspections in PG County is to help the poor sad impoverished minorities gain a good rental unit. But it only restricts supply and drives up demand and prices. Landlord profits rise and rise. The suckers are the ostensible beneficiaries.

    1. It’s actually very simple. In order for the people to have their multicultural kingdom emerge with all its different interests vying for exposure in the United States, the only way that it can be paid for is through deficit spending. I mean massive deficit spending. Moreover, in order for it to come into fruition and be paid for, the only way that it can happen is through the types of engineering we see in the financial and asset markets we are experiencing right now. At least, I’m aware of it and I don’t get my knickers in a knot. None of this is independent of one another. You want an antichrist Kingdom? Then you need to have an antichrist monetary and financial system.

      Cha ching, baby!

    2. They are crying housing collapse in Canada, but so far, the only thing I have seen is that condo prices in some cities have dropped. Detached homes continue to rise across the board.

      1. I just had a quick look at detached homes – and you’re right – nothing changed there, in terms of listing prices – but maybe there aren’t as many hot bidding wars? Interesting about condos – lots are used as AirBnB, or rental income. Still, shouldn’t be much of a change. People do have to live somewhere.

  9. Based on the USTs MTS up-to-date data on its website,. Coupled with this morning’s first GDP estimate of nominal GDP,

    Debt to GDP is down to 1.2300 in 2Q from 1.2466 1Q. Not a big drop, but a drop anyway.

    Considering the sharp drop in real GDP, the ratio decline is still good for the USG. 👍

    1. 10-year UST note futures popping up over resistance this morning. 10-year yields like the lower than expected GDP and bullish Fed comments on neutral policy.

  10. The only thing that will stop these asset markets from going higher in the long run will be planet 7x like Gill Broussard says or a dropped nuke in DC

    1. Nominal GDP rose $465 billion in 2Q.

      USG debt write-off continues.

      USG and asset owners: #winning
      Wage slave: #losing

    2. S&P 500 5000K? All that Covid money has to go some place and it is still not enough.

  11. I like the GDP numbers for the asset markets. I don’t understand how the market consensus was for +0.5%, but this definitely helps the Fed’s case to keep interest rates and bond yields lower.

    I really keyed in on the GDP price index, which was higher than forecast. This really helps the USG case to effectively inflate away and write off more treasury debt.

    The unemployment claims continue to edge higher and view this as good for the yield curve.

    I’ll come out with some writing on my analysis on these numbers.

    So far, the markets are pretty calm, but stocks like them marginally, and so do I.

    1. This is definitely dollar bearish on the trade and commodity prices have responded.

    1. Hey Chris,

      Thanks for your answer on my other comment.

      What would you suggest is a good buy right now? Is today a good day to buy or should we wait for a pull back from today’s news?

      Best regards,

      1. Nasdaq on fire right now. Low rates means better prospects with growth. I bought a few quick small stocks here. All things looking decent. Dollar dump in knee jerk reaction helps oil and gas and commodity stocks, too. Look at MSFT and AMZN. Nice

        Powell seems confident that the Fed is at neutral policy now. He is a rah rah for downplaying GDP weakness.

    2. Market uptick across the board right at 2:34PM central time. Incredible to see all that sideline money come into play. The same thing happened the last FED announcement, however it didn’t last long, came back down and most everything went lower. I think we have more clairity with the numbers than last time, so maybe there won’t be a selloff.

      GDP and Yellen runs her mouth tomorrow. However if it’s a data driven statement like Rosenberg says then the numbers are not really all that bad.

      1. I was listening to the Powell press conference, and the earnest spike and continued run up commenced exactly when he said he suspects the Fed is at neutral policy as of now.

        I was under the impression that the FED wouldn’t say it had reached neutral policy until about 3% or in the next meeting.. To me was the biggest shocker and that’s when stocks took off. When I heard that. I started buying trades. That is a huge statement. And that’s the one thing that doesn’t seem to be getting caught with the media.

  12. Durable goods hits it out of the ballpark.

    Trade deficit in goods continues to narrow. A nice sign that the goods deficit is once again below 100 bil.

    The onshoring of production will narrow this further over time.

    Retail and wholesale inventory levels rose more than expected, and reflects what is already out there for public consumption on the individual firm level (e.g. WMT)

    Clearly, the market likes these overall morning’s numbers.

    1. Huge crude oil draw driving up oil this morning.

      I wonder if the market is getting ahead of itself in thinking the Fed will tilt dovish in anyway.

      Today’s Durables and goods trade data look impressive.

  13. If Rosenberg is correct, we buy everything. Inflation will stay elevated and bond yields will crater. More real debt burdens written off.
    —————

    Why An Analyst Is Expecting The Fed to Shock The Market Tomorrow. And How You Should Invest
    Aaron Bry, Benzinga Editor
    July 26, 2022 3:17 PM

    ZINGER KEY POINTS

    •Legendary bond analyst David Rosenberg believes that the Fed’s hawkish cycle ends tomorrow.
    •Rosenberg tells his followers to buy bonds in anticipation of the Fed pivot.

    https://www.benzinga.com/government/22/07/28213052/fed-will-reverse-course-tomorrow-and-halt-future-rate-hikes-analyst-predicts

    “Don’t Fight The Fed” is a popular mantra Wall Street traders are passing around to each other throughout the last few months. If you look at a chart of the overall stock market, you can see where the Fed started to pivot and get more hawkish in November 2021.

    But, legendary bond analyst David Rosenberg believes that the Fed’s hawkish cycle ends tomorrow. The Fed will release its Federal Fund Rates at 2 pm Wednesday. Street estimates are for a .75% rate hike. Rosenberg said on Twitter on Tuesday that the Federal Reserve will abandon forward guidance and rate commitments and instead rely on data.

    “Watch the Fed abandon forward guidance and rate commitments and embrace data dependency,” Rosenberg said on Twitter. “This cycle of hikes ends at 2pm tomorrow. Buy bonds.”

    When Rosenberg refers to “data-dependency” he is most likely referring to the fact that there is data currently showing inflation could be slowing down (gas prices falling, Walmart slashing apparel prices), and the Fed will be in a position to monitor data in real-time and make decisions about the Federal Funds rate.

    While Rosenberg tells his followers to buy bonds, the Fed reversing its stance on future rate hikes would likely be good news for stocks as well.

  14. Looks like the weekly earning reports are doing okay and lifting the market a bit. Oil is holding that 93 area too. The FED rate decision may have been priced in.

    1. Despite strong dollar and high oil prices, earnings are okay. Goog looked fine after SNAP.

      Retail getting doused, but to be expected. Oil holding up so far. Stuck in this tight range. Could rise of gas prices move higher.

      All is in limbo as we wait for the next Fed statement tomorrow.

  15. With regards to oil and gas, USA, Inc. seems to be cleaning up more than Russia, Inc. Russia turns around and detonates its profit in Ukraine. In America, the shareholders are doing well. Of course, Europe is getting pummeled, but America shines. The US produces at least 40% more nat gas than the Russia, but it’s Russia who is getting the last laugh in the alt-media.

    The USG seems to “ironically” be cleaning up as its real debt burden diminishes by the day.

    I wonder who really benefits from all this “chaos” over the Ukraine?

  16. We all did it! We achieved greatness. All the different peoples, religions, sexualities, languages, races, and philosophies can all live together in harmony. We overcame the impossible. The dream has come true.

    Just look out your window and read the news to view the results for yourself!

    We did it! America did it. The people wished on the monkey’s paw. Unfortunately, it means being ruled by Satan and only the wealthiest get ahead.

    In this reality, none of it is independent of one another. Enjoy this new great country. We showed the writers of the Bible that it could be done.

  17. China Seals Off IPhone Maker, CNOOC in Shenzhen to Battle Covid

    https://www.bloomberg.com/news/articles/2022-07-25/china-seals-off-iphone-maker-cnooc-in-shenzhen-to-battle-covid

    (Bloomberg) — China has forced some of its biggest companies, including iPhone maker Foxconn and oil producer CNOOC Ltd., to operate within a “closed loop” restricted system for seven days as the southern manufacturing hub of Shenzhen battles its latest Covid outbreak.

    The city government has asked its 100 biggest companies, including automaker BYD Co., networking giants Huawei Technologies Co. and ZTE Corp. and drone-maker DJI to restrict operations only to employees living within a closed loop or bubble, with little to no contact with people beyond their plants or offices. Authorities also asked companies to reduce unnecessary interaction between non-manufacturing staff and factory floors to reduce infection, according to a Shenzhen government notice seen by Bloomberg News

  18. Another benefit of inflation, at least for our adversary. Living in rural areas will be luxury living. I was recently running numbers, comparing the living out in rural Virginia with living in Fairfax county. Other than cheaper real estate prices, the cost of living away from the city centers is definitely more expensive.
    ————
    Inflation is crippling rural America and may even drive people to the cities

    https://www.npr.org/2022/07/25/1112915507/inflation-rural-america-gas-prices-economy

    Inflation is crippling rural America and driving some people to consider moving closer to cities in an effort to ease the financial stress, according to the latest analysis from one expert.

    1. Well put Chris,
      I see the same problem with rural areas being more expensive. I am looking into northern Maine. While real estate is still cheaper than the city, the price differential between rural real estate and suburban real estate is quickly shrinking as the city slickers buy up these rural areas. Even worse , the cost of everything else is more expensive such as groceries, energy, and the basic utilities such as electricity, internet, and phone is much more expensive. Some areas have no internet nor cell phone coverage. The choice of providers is much more limited so they charge more.

      Forget about jobs in rural areas unless you can work remotely because there are less job choices and the wages are much less. Rural economies have been declining for years and many rural areas are economic dead zones.

      I think in the end, the wealthy will have the luxury and safety of the rural areas and the not so wealthy will be forced to live in the dangerous cities paying high rent.

      1. In CA it seems any rural area that we all would like to live in because it’s relatively cheap and very scenic is on fire, has been on fire, or will be on fire. My thought is to look at the 5G coverage map as a guide NOT where to live – or you will be burned out.

        I’m still house hunting and taking a beating in the process. I’m in a paid off condo in a very desirable area but that means nothing as a contingent offer. The underlying message is unless I have all cash don’t even bother. The interest rate increase took away all my buying power, because when rates were at 3%, I would be able to put a huge chunk or buy a place outright prior to selling my condo. It’s impossible to compete with house flippers. I’d have to sell my place and live with my mom just to be in the game – unless I marry my real estate agent (at least she’s cute, fun and smart!). I’m already seeing the same houses I looked at several months ago relisted for at least $300K more so in my area house flippers seem to be running the show.

  19. Excellent news for those hoping to effectively write off the real costs of UST debt burdens and for asset owners.
    ———

    US Inflation to Stay Well Above Fed’s Target
    July 25, 2022 at 5:00 AM EDT

    US Inflation to Stay Well Above Fed’s Target
    Model assigns zero probability to a drop below 4% in 2023

    https://www.bloomberg.com/news/articles/2022-07-25/us-inflation-to-stay-well-above-fed-s-target-chart

    Source: Bureau of Labor Statistics, Bloomberg Economics

    US inflation may be close to a peak, but it’s very likely to stay above 8% through year-end. Bloomberg Economics’ model assigns zero probability to a drop below 4% in 2023. Taken together with increasing recession risks, the Fed faces a tough balancing act as it attempts to bring stubborn price pressures under control without tipping the economy into contraction.

  20. Another HIV drug approved for COVID.
    ——–
    China approves Genuine Biotech’s HIV drug for COVID patients

    https://www.reuters.com/world/china/china-allow-use-genuine-biotechs-hiv-drug-covid-patients-2022-07-25/

    BEIJING, July 25 (Reuters) – China on Monday gave conditional approval to domestic firm Genuine Biotech’s Azvudine pill to treat certain adult patients with COVID-19, adding another oral treatment option against the coronavirus.

    The availability of effective COVID vaccines and treatments is crucial in laying the groundwork for China’s potential pivoting from its “dynamic COVID zero” policy, which aims to eliminate every outbreak – however small – and relies on mass testing and strict quarantining.

    The Azvudine tablet, which China approved in July last year to treat certain HIV-1 virus infections, has been given a conditional green light to treat adult patients with “normal type” COVID, the National Medical Products Administration said in a statement.

  21. Asset market alert!!! Asset market alert!!!

    Oil WTI looking weak on the daily here overnight. It needs to get above 100 or that daily bear flag will fail to 85 within a couple days. If it goes below 80, look for S&P eminis to fly fly fly…. Oil in mid 70s will send spoos to at least 4,300 maybe as high as 4,500-4,600 if it hits second target at 65.

    WTI daily and weekly charts looking crappy for oil bulls. Bear flags flying.

    For the rest of us, this is great news. Commodity prices under pressure for a couple months now. Oil will eventually give in, too.

    Don’t get caught with your pants down reading Zerohedge and Infowars pro-Russian propaganda.

    1. Zerohedge is always talking doom and gloom and market crash. I use to read a comments by a person with the user name milliondollar bonus he or she would always say how the market was going up and would get called names……but he or she was right. Gas has gone down in my area about $.60 now $3.95.

      1. Gas below 4 down the road. Let’s see if oil can hold 93.5 on the weekly close. Lots of jockeying before the Fed announcement.

        By definition, the markets have an upward tilt. Just look at M2. Just look at inflation. Earnings generally increases. Rents go one way. Prices for non-fungible (not gas) items rarely ever go down.

        Tax policies are designed to lift asset prices to help the government increase cap gains taxes and property taxes.

        For those predicting lower prices, the odds are against them by function.

    2. Hey Chris,

      Can you please explain the mechanism behind why the spoos would be supported by lower oil prices? Is it because the cost to operate for businesses is lower and consumer prices will be more affordable? Leading to increased earnings?

      Thank you

      1. Yes. That’s primarily why. Also, it would indicate that the supply chain disruptions from the Russia situation is being put in perspective and the world is adjusting accordingly.

        Cheaper oil would be a huge catalyst to turn real GDP up more. Transportation costs are beating up many S&P 500 firms. I can think of AMZN immediately.

        Any symbol for the consumer to feel he or she is feeling less of a squeeze benefits spending. The services PMI was in outright contraction this month and manufacturers are holding up here because they are onshoring.

        There’s a sweet spot for oil prices. not too cheap, not too expensive, but just right. E&P energy firms make money at say 65 bbl, and the shipping, transportation, and logistics costs come back down to longer term trends at that level. Anything over 100 beats up all that and destroys aggregate demand.

        Sure, suppressed bond yields, coupled with high inflation and elevated oil prices benefits the USG with its real debt burden, but we can’t do this forever. We need to see positive real GDP growth

      2. Check out WMT after-hours for an idea of what higher food and fuel costs can bring to earnings.

        While this may look like WMT is getting beat up, it also has the ability to more effectively navigate higher inflationary environments. This helps their standing in the industry as fewer firms can keep up.

  22. Strange, but these supply chain “choke holds” have the perverse way of helping the Western governments write off the real value of their COVID-related debt.
    ——–
    World’s Key Workers Threaten to Hit Economy Where It Will Hurt

    https://www.bloomberg.com/news/articles/2022-07-24/world-s-key-workers-threaten-to-hit-economy-where-it-will-hurt

    The pandemic has put unprecedented strain on global supply chains -– and also on the workers who’ve kept those systems running under tough conditions. It looks like many of them have had enough.

    A surge in strikes and other labor protests is threatening industries all over the world, and especially the ones that involve moving goods, people and energy around. From railway and port workers in the US to natural-gas fields in Australia and truck drivers in Peru, employees are demanding a better deal as inflation eats into their wages.

    Precisely because their work is so crucial to the world economy right now –- with supply chains still fragile and job markets tight –- those workers have leverage at the bargaining table. Any disruptions caused by labor disputes could add to the shortages and soaring prices that threaten to trigger recessions.

  23. MI Composite Flash – Released On 7/22/2022 9:45:00 AM For Jul, 2022
    Consensus Actual
    Composite Index was much lower at 47.5

    Manufacturing Index powered above expectations at 52.3

    Services Index cratered to 47.0

    What terrible numbers overall, but manufacturing is rising and above consensus.

    Look at the UST yield curve respond nicely

  24. Is it just me? Or is oil getting ready to fall through support at 93.50. Oil needs to stay above 93.50 going into close today in order to maintain the upward bias. But it does not look good going out to next week. Oils getting very comfortable in the 90s.

    The powers need to conjure up another crisis to maintain this elevated level of inflation, so the government USG can effectively write off more treasury debt.

    What blows me away is how amenable workers and pension plan participants are to their wealth destruction. I see year over year inflation at 9% and their COLAs are anywhere from 2 to 4%. Their pension benefits are barely budging, yet not a word.

    This is why I say this can continue if the powers wanted to. They are gauging us in real time like Lab rats and are amazed and how much they can get away with.

  25. Even two Marxist mayors, Bowser and Adams, are having regrets. On the bright side, these lower IQ illegal aliens are driving up my rents and SFR prices on a monthly basis.

    I have to tip my hat to Biden. Never had a president really helped me to make so much money by sitting on my can. My rental income is up about 30% this year. Thank you, Barack and Joe.
    ———-

    Illegal immigration starting to hit home for US cities

    https://nypost.com/2022/07/20/illegal-immigration-starting-to-hit-home-for-us-cities/

    Big-city Democratic mayors such as New York’s Eric Adams and DC’s Muriel Bowser have realized, suddenly, that illegal immigrants are straining their social safety nets.

    They’re accusing Texas Gov. Greg Abbott, but there’s only one person to blame: President Biden.

    It was only ever the Biden government that did this, starting on inauguration day 2021, with radical policies gutting detention and deportation. They unleashed a mass migration crisis far beyond anything in the American experience, one that has utterly smashed every single illegal immigration record on the books.

    As things stand, well over 2 million border crossers have fanned out across America. Millions more will be granted admittance in the next two years if the administration stays this course. By the end of Biden’s term, at this rate, the number of people let in at the border will probably exceed 6 million.

  26. Don’t short Tesla. It has the support of high places.
    ————-

    Tesla Now Has an Exclusive Lane at a US-Mexico Border Crossing

    https://www.bloomberg.com/news/articles/2022-07-21/musk-s-fast-lane-speeds-tesla-suppliers-across-us-mexico-border

    (Bloomberg) — At a remote Mexico border crossing a few miles upriver from Laredo, Texas, a green highway sign welcomes friends of an American company in an instantly recognizable font: TESLA.

    After moving its headquarters to Austin from Silicon Valley, Elon Musk’s firm has struck a deal with one of Mexico’s most pro-business states. Tesla Inc. suppliers now have a dedicated lane at the Colombia Solidarity checkpoint to quicken the crossing, said Ivan Rivas, the economy minister of Nuevo Leon.

    “It was a simple incentive,” Rivas said in an interview. “What we want is a crossing that’s much more expedited and efficient. And maybe there will be a lane for other companies in the future like there is for Tesla.”

  27. There is a reason why midwest prices are low. Many houses are bug infested tear downs. And the demographics have changed dramatically. However 5-10 miles from the city, the cornfields are bought up and new construction is happening, yet with very expensive prices and property tax, it makes renting look like a good deal. Local government officials work with investment firms to make it happen, so it’s out of reach for the average joe. I was looking at a house on a main street lot but was outbid by an investment firm in another state. They tore down the house put up a Dunkin Donuts/Baskin Robbins closer to the street.

    I think more people are staying single and the single mothers are going on the welfare system to get health insurance and pay the basic bills. I think if someone can focus on building small one bed, one bath houses they could do really well. Not sure about the zoning laws. Can’t have mobile homes or pre manufactured houses in certain areas. That would be to affordable for the average workes. So they leave up these tear downs to get the utilities and property taxes off people.

    1. I knew of a guy who immigrated from Turkey and he brought up a couple dozen of those types of homes in Dayton Ohio; the types that you’re discussing. He had family members move in and he opened up a trucking business and now he’s worth millions.

      Those houses are worth a lot more now. That’s Dayton.

  28. For those of you who think that renewables and solar and wind power are good for the environment, I invite you to take a look at what the utilities did along the border of Virginia and West Virginia on that US 50 corridor.

    They installed hundreds of those wind turbines and destroyed the environment that once provided some beautiful vistas. The terrible thing about these wind turbines is that technology will probably render them obsolete in the next 15 to 20 years and then we’ll be left with a wrecked ecosystem in that entire area.

    Most of these people who are promoting wind power and solar live in cities and have no concept of the damage that they bring to the environment. They’ve been indoctrinated in their Marxist philosophies and actually believe that renewables can fully offset abiotically formed hydrocarbons. Although they think they’re “fossil” fuels.

    1. Yes green energy really wrecks the environment in many ways. The wind turbines are such eyesore monstrosities in rural areas. They also harm the birds as they get caught on the turbines. In addition the wind turbines do not generate much energy.

      Solar panels also ruin the rural landscape. I routinely take trips to Vermont and I see these beautiful cow pastures get wrecked with rows of solar panels.

      Electric cars helping the environment? LOL. The electricity to charge the cars usually comes from fossil fuels. What happens when the batteries get disposed. The batteries contain all sorts of heavy metals. I hope there is a recycling plan for these batteries.

      The greenies are brainwashed, self righteous, virtue signaling city dwellers. This whole green thing is a scam.

      1. 100% the entire climate change is a scam, and the push for electric cars/alternate sources of energy. Some of these people have been so indoctrinated that they purposely start forest fires to help spread the message that climate change is real. Unbelievable the type of damage they do to the nature and animals living there; and of course the people whose homes get totally wrecked. Miss the 90’s. The adversary has done so much damage.

        But not just that but the family unit has been attacked as well. They teach young women they should have sex with as many men as possible. No wonder marriage rates are falling, and abortions are climbing. Guys are having sex with no strings attached; which is sexual immortality. Before if you wanted sex with a woman you had to marry. Therefore men had motivation to marry. Now it’s normal to hear someone has divorced or cheated on a spouse; which is strongly written against for in the Bible and examples of sexual immortality. The adversary made a major sin normal. God loved Jacob, and Jacob had four wives. That was never considered sexual immortality in the Bible. But the adversary has conditioned many to think that’s a bigger sin than a divorce, cheating with someone whom is married, fornication, or doing an abortion. The deception is everywhere.

      2. I’ve never encountered a Tesla driver that I liked. They rip around like they are better than everyone, until they have to sit for hours and wait at a charging station.

  29. Philadelphia Fed Manufacturing Index came in much worse than the expected -2.5 at a -12.3. there is nothing good to be gained from looking at that.

    Business confidence came in at minus -18.6.

    The prices paid component is down a lot to 52.2 from last month 64.4.

    Looking at how commodities are behaving this morning, especially oil, I’m beginning to think that all of this inflationary pressure is fading fast.

    The ECB just hiked 50 basis points, 25 basis points more than expected.

    Jobless claims continue to move higher.

    I think the powers that be have learned a lot from their recent experiments and are allowing the lab rats some rec. time in the yard.

    I read a headline where Martin Armstrong is predicting inflation from hell and massive civil unrest. At least that’s what I scanned on Zerohedges Twitter feed. Take the contra.

  30. Really appreciate all this first class analysis you serve up for us Chris… I’ve acted on it over the past couple of years & it has proven profitable

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