US average mortgage rates just surged above 7.5% for the first time in 23 years
There are some reasons why US house prices haven’t crashed: 1. Buyers can’t afford the rates; 2. Sellers would be insane to sell a home with a significantly lower rate to buy another at 7.5%. Market is frozen. The economy is currently experiencing a significant tightening of financial conditions, largely driven by the persisting fragility in the Treasury market. The bill will come due at some point. Source: Crescat Capital, The Wolf of All Streets
Nestle on the lower end of the channel
Nestle (NESN SW) is once again testing the lower end of the channel around 104. Will it rebound like the last times ? Source : Bloomberg
1971 vs NOW
The average U.S. annual income in 1971 paid off a house in ~2.5 years, could buy 3 new cars in a year, send 4 kids to Harvard in a year and easily afford food, shelter, necessities and entertainment. Does the older generation understand the difficulties the young face today? Source: Gabor Gurbacs
The power of compounding: What a difference 2% make!
Source: Michel A.Arouet, BofA
Very interesting WSJ article: "The Scary Math Behind the World’s Safest Assets. Washington has laid the seeds of a crisis that Wall Street can no longer ignore"
Here's an extract: "Consider that around three-quarters of Treasuries must be rolled over within five years. Say you added just 1 percentage point to the average interest rate in the CBO’s forecast and kept every other number unchanged. That would result in an additional $3.5 trillion in federal debt by 2033. The government’s annual interest bill alone would then be about $2 trillion. For perspective, individual income taxes are set to bring in only $2.5 trillion this year. Compound interest has a way of quickly making a bad situation worse—the sort of vicious spiral that has caused investors to flee countries such as Argentina and Russia. Having the world’s reserve currency and a printing press that allows it to never actually default makes America’s situation far better, though not consequence-free. Just letting rates rise high enough to attract more and more of the world’s savings might work for a while, but not without crushing the stock and housing markets. Or the Fed could step in and buy enough bonds to lower rates, rekindling inflation and depressing real returns on bonds".
The best performance stocks in the S&P 500 this year...
Source: Charlie Bilello
With “risk free” rates above 5%, the typically low-growth, high-dividend payers in the sp500 are massively underperforming in 2023
The 101 non-dividend payers are up 20.4% YTD, while the 100 highest yielders in the index are down an average of 3.5% on a total return basis. Source: Bespoke
Only 16% of Californians can afford to buy a home, a situation that is unfortunately not unique to the state, but where they are leading the way
Source: Markets & Mayhem, Bloomberg
