Here's the Deal - October 6, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 40 of 52 for 2024: 77% of the way through 2024}

Weekly Note:

Wild week as this week we saw:

• yet another complete meltdown and failure by FEMA

• the beginning and then subsequent postponement of a major port strike which halted products from moving through east coast ports,

• a selling in the markets right on time for Rosh Hashanah (sort of),

• a surprise stellar jobs report which once again shows how difficult Economic Slowdowns can be to navigate through the data without a guide,

• which led to the buying back of stocks after Rosh Hashanah was over without waiting for Yom Kippur,

• and the first ever show/pod appearance from yours truly.

Be honest, how cool was it to know about the port strike weeks before everyone else? C’mon, you know it’s fun when you're ahead of the curve on something that eventually goes mainstream. And here’s the best part; when you consistently stay informed like this, it becomes easier to make decisions that can lead to profits. And let’s be real, who wouldn’t want that? Profits help us afford the things that make life more enjoyable—good food, a comfortable home, new experiences, and less financial stress.

As I’m sure you’re aware of now, the strike both came and went this week. After reading into it further, this is really about a group of people that desperately want to stop technology and innovation from making the ports more productive. Which is why it was so surprising to see the interview the ILA’s lead negotiator, Harold Daggett, cut a few weeks ago leading up to the strike deadline.

So, let me get this straight. This guy was about to lead his “men” into a strike which will need strong public support the longer it goes as it would cripple the US economy and severely limit your ability to provide food and shelter to your loved ones, and he cuts this Bond Villain-esque promo???

Probably why shortly after this interview went viral so did personal information about Daggett. Things like his $800/yr - $900/yr pay package from the union and pictures of his Bentley, Tony Soprano-esque home in New Jersey, and recently sold 76-foot yacht.

Two days later, the strike is postponed as workers got a raise and a promise that we all get to go through this extortion again in January after the election and Holiday shopping season.

I say extortion because the real issue here is a changing industry and a group of people that believe they should get paid more to supply a less efficient and less effective service than what is currently available. The refusal of which they claim is worth shutting down the entire US economy until they get their way and force the rest of the country to needlessly live in a bygone era. Their reluctance to accept automation in the ports, something already done in China and Rotterdam, adds to more costs in most everything you do and consume. It also slows the progress and productivity of all other industries down the line as truckers, who are making far less and many paid per mile, get stuck waiting hours and sometimes days to load or unload at the ports.

With that being said, the strike probably boosted Q3 activity as some orders were more than likely pulled forward in anticipation of the strike. This is also something to keep in mind when we get Q4 data in the beginning of next year.

This week also saw more negative news out of the residential real estate sector. According to Redfin, only 25 out of 1,000 US homes changed hands in the first 8 months of the year. The lowest rate in decades. The good news is that this is the type of thing you see at bottoms. History suggests that now that mortgage rates and the Fed Funds Rate are declining, activity will begin to pick up and lead the residential real estate sector out of it’s severe recession. This may seem like a stretch to some, but a look at the history of credit cycles says that it’s merely par for the course. The bad bet here is to bet against that move, as markets are telling you that they agree. Once mortgage rates get below 5.5%, that is when activity will more than likely accelerate higher after a period of slower growth.

The jobs market was also a major focus as the JOLTs report (job openings) showed a surprise resurgence to over 8-million jobs available.

That was followed up on Friday by a monster jobs report which saw larger than expected growth in average hourly earnings and a whopping 254k jobs created vs the 147K expected. Whether you think the numbers are fake or not have absolutely no bearing on the fact that this moved markets. Should these get revised down, the markets and increased share prices don’t get erased from accounts that were smart enough to move with the markets. Therefor, it is a waste of your valuable time to push back against this claim as it will only serve to piss you off and hold you back financially.

Those that believe there is some level of “Fuckery” in markets and yet choose not to take this into account are terrible analysts.

Ultimately, the fact is that the economy is still growing and we are now rolling into its seasonally strongest period. If you don’t think this is warranted then ask yourself and those around you how much you are planning on spending during the holidays on family, loved ones, holiday parties, and family get-togethers. If it is more than or consistent with the last few years, then why would you think the economy is on the verge of collapse? You are answering the question with your own behavior and you are not at all alone. That is one reason why this economy will continue to grow into 2025.

The question now is; how much more and will it cause another wave of inflation during this cycle? That is your worst case scenario at this moment in time.

Which was the topic for the very first podcast/show appearance from yours truly…

I was graciously invited by my friend Jason Perz to appear on The Holy Macro Show with he and Kashyup Sriram. It was a great discussion, and I dorkingly admit that I was super excited. The best part was that the preparation forced me to organize a bunch of visuals I’ve been working on for months into a system.

It turned into one of those projects where you do it, then realize it could be better. Then you do an overhaul and think it’s good to go. Then wake up at 2:30a the morning of the show and think, I have a better way which led to a much better overhaul of the system before showtime.

Without realizing it, I had over a hundred slides to tap into to show what’s happening now in the economy and how it stacks up with other credit cycles in the past. Then came showtime… And because of a technical issue due to inexperience on my side, I couldn’t use any of them because the visuals appeared too small on the screen. Lol

So, I had to switch gears on the fly. No problem. I’ve had bigger issues to overcome in the middle of discussions and presentations.

Of course, the biggest help was Jason and Kashyup’s expertise and ability to roll with the situation. Those guys are pros and incredible analysts that have the ability to not only see what is happening, but also understand why it is and what that more than likely means for the years ahead.

Appearing on Holy Macro was a fantastic experience which I learned much more from than I was anticipating, and I can’t thank Jason and Kashyup enough for having me on the show.

*For the sake of street cred it should be pointed out that the vast majority of views are on X/Twitter.

The coming week brings updated inflation reports from September as both PPI and CPI will be released. Earnings Season for Q3 also begins this week as the unofficial start of earnings season begins with “Bank Friday” on Oct 11th with JP Morgan, Wells Fargo, BlackRock, and BNY report.

At this stage in the cycle, I’ll be watching profit margins closely as a rollover there will more than likely lead to the surge in unemployment needed for a recession. However, at this point, they are still plateauing at higher levels which is consistent with Economic Slowdowns. Should they break out of the current range higher, then it will be time to reassess as the implication could mean a true soft landing and no recession has occurred. That is a question for another day though, as it needs to happen first.

Top Economic Stories of the Week:

***More articles will be posted in the comment section to ensure the initial email is not too big to deliver to your inbox.

Most Important Data Drops from the Past Week:

This Week in Markets

They sold Rosh Hashanah, but didn’t wait to buy Yom Kippur. Instead the buying was propelled by the monster beat in the jobs report which sent markets gapping up on Friday morning, and to the dismay of many amateurs who are only able to think in terms of “iT gOnE Up tOo mUcH. tHis Won’T eNd WeLL.” stocks cruised higher into this week’s close.

It was another one of those weeks which on the surface doesn’t look like much happened, but saw massive moves to the upside for many names and a very strong week if you know what you’re doing.

There isn’t a single person who knows what thy are doing that is shorting this market in anticipation of a crash.

Seriously, with growth names like LSF (up 24.5% this week), ENVX (24.79%), RKLB (holding it’s 28.11% gain from last week) putting in and holding huge gains at the beginning of new uptrends into the seasonally strongest time of year for stocks, there’s not much to be bearish about. And it is staggering how many more great set ups in stocks that are poised to grow an easy 2-3x’s in the coming months.

The truth is crashes do not happen as markets continue to put in new highs. Instead, they happen when a final new high cannot be reached and you get an initial selloff and recovery. Only the recovery is not able to reach those previous highs before rolling over again. That is not happening right now. Instead, what is happening is stocks and indices are holding gains and then continuing higher. That is as good as it gets.

There will come a time when this will end and barring any black swan, you will know about it before most. When that time comes, people will look at you like you’re crazy when you tell them a crash is on the horizon. And right now, no one believes in this market, so it continues to go higher in what is yet another example of why optimism continues to win the day.

The Week Ahead

Economic Data:

Earnings to watch:

WTF of the Week

Quote of the Week

If you enjoyed this post or found it useful, do me a favor and hit the like (heart) button.

Click the Leave a comment button if you have any questions or comments, or need something clarified. Don’t be shy. The main point here is to improve constantly. Questions and comments help us both and tells me what you are interested in learning/hearing more about.

Learn. Improve. Pass on.