The Higher Standard

Bank of America analysts warn that the U.S. economy could be headed for a "no landing" scenario thanks to the hot labor market, but that might not be good news for the stock market. BoA chief economist Michael Hartnett predicted a "no landing" scenario in the first half of the year, where there is no immediate slowdown in growth but inflation remains above trend. That would likely force the Fed to raise interest rates much higher than previously forecast — and keep them elevated for longer.

In this episode of The Higher Standard, Chris and Saied examine this news and what it could mean for the economy as a whole.

They discuss comments from Equity Group Investments founder and chairman Sam Zell, stating that Jerome Powell "missed the boat" on inflation, allowing "super-low" interest rates to exist for too long.

Chris and Saied look at a warning from economist Mohamed El-Erian that the Federal Reserve won’t be able to get US inflation down to its 2% target without “crushing the economy.” He added that the central bank is unlikely to officially change that goal post.

They also offer some thoughts on a tweet from Charlie Bilello, Chief Market Strategist for Creative Planning, LLC, indicating that only 21% of homes for sale in the US sold above their final list price in the last 4 weeks, down from 40% a year ago. This is the lowest % since March 2020.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why holding rates for a prolonged period of time will create mental strain for people.
• The definition of a 'hard landing,' and what it means for the economy.
• Why household debt saw its largest increase in 20 years in New York.
• Whether the FOMC has the courage, after holding rates for 6-8 months, to raise them again.
• And so much more...

Resources:

The Real Deal via Instagram

"Bank of America Says Stock Market Threatened With 'No Landing' Scenario" (article from Entrepreneur)

"All aboard the mortgage rate roller coaster" (The Data Deli via Instagram)

"Fed Can’t Reach 2% Inflation Without Crushing Economy, El-Erian Says" (article from Bloomberg)

Charlie Bilello via Twitter

"Americans Have Nearly $1 Trillion in Credit Card Debt" (article from Bloomberg)

"Investors Worry Too-Hot Economy Will Put Fed on More Aggressive Rate Path" (article from The Wall Street Journal)

Retail sales rose far more than expected in January as consumers persevered despite rising inflation pressures. According to the report by the COmmerce Department, advance retail sales for the month increased 3%, compared with expectations for a rise of 1.9%. Excluding autos, sales rose 2.3%, which is not adjusted for inflation. The ex-autos estimate was for a gain of 0.9%.

In this episode of The Higher Standard, Chris and Saied examine this news and try to determine what effect it will have on the economy and the seemingly ever-present inflation.

They discuss comments from St. Louis Federal Reserve President James Bullard, who said that continued Federal Reserve rate increases will “lock in” slowing inflation even with continued economic growth. He also says it's likely that the economy will slow and the unemployment rate rise towards its “longer-run natural level,” something economists define as consistent with stable inflation and in the case of the United States estimated by Fed policymakers as around 4%.

Chris and Saied look at data from mortgage technology and data provider Black Knight Inc. showing that some of the most popular pandemic boomtowns such as Phoenix and Seattle, as well as popular West Coast cities like San Jose and San Francisco, posted home price declines of more than 10% from their 2022 peaks.

They also offer some thoughts on a report from the Labor Department, which indicates that inflation rebounded in January at the wholesale level, as producer prices rose more than expected to start the year.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why Chris believes that home values have gone down, but we're not seeing accurate reporting of that fact.
• Why the Fed's main tool for controlling monetary policy is the Fed funds rate.
• The most opportune time for people to list their homes.
• Why unemployment is often a by-product of the Fed raising interest rates.
• And so much more...

Resources:

"CPI shows US inflation still sticky and slowing grudgingly in January" (article from MarketWatch)

"Fed's Bullard: Further rate increases would "lock in" disinflation" (article from Reuters)

"Zillow says the home price correction is winding down—here’s what 28 other forecast models have to say" (article from Fortune)

"Map: Here's where home prices are dropping the most" (article from Yahoo! Finance)

"Here’s the breakdown of the inflation report for January — in one chart" (article from CNBC)

"Retail sales jump 3% in January, smashing expectations despite inflation increase" (article from CNBC)

"Consumer debt hits record $16.9 trillion as delinquencies also rise" (article from CNBC)

"Wholesale prices rose 0.7% in January, more than expected, fueling inflation increase" (article from CNBC)

So it's finally happened. The Federal Reserve Board warned member banks that it intends to presumptively prohibit a large portion of cryptocurrency banking activity, as the demand for more guidance over digital assets has grown following rampant instances of fraud. The regulator issued a new policy largely prohibiting digital assets from the regulated banking environment, primarily due to security concerns.

In this episode of The Higher Standard, Chris and Saied examine this news and try to determine what effect it will have on the crypto space.

They discuss a recent Gallup poll indicating that half of Americans say they are financially worse off now than they were a year ago, the highest share since 2009. About 61% of those with a household income of less than $40,000 reported they were worse off, compared to 49% and 43% for middle- and high-income households respectively.

Chris and Saied look at a report from Zillow stating that the amount of time it would take to save enough to put 10% down on a typical home in Austin rose from eight years in 2019 to 13 years in 2022.

They also offer some thoughts on Affirm Holdings Inc. seeking new sponsor banks to diversify the sources of loan originations, as the buy-now, pay-later platform comes under pressure to improve earnings after a slowdown in growth.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• The concept of centralized cryptocurrency exchanges and how they work.
• What’s happening in the commercial real estate market in terms of lagging responses.
• Why banks have an ongoing due diligence requirement for commercial loans.
• The reasons why more San Francisco homes are selling below the asking price in LA.
• And so much more...

Resources:

"Two More ‘Shoes To Drop’ In The Real Estate Market" (article from Forbes)

"Morgan Stanley says the stock market is ‘disconnected from reality’ and it’s going to hit bottom this Spring" (article from Fortune)

"Half of Americans say they're worse off than they were a year ago" (Bloomberg Business via Instagram)

"Federal Reserve Issues New Restrictions on Crypto Banking" (article from NextGov)

"More San Francisco homes selling below asking price. Could that trend come to L.A.?" (article from the Los Angeles Times)

"It now takes roughly 13 years to save for a down payment in New York and Austin" (Bloomberg Business via Instagram)

"Fed’s Neel Kashkari says central bank has not made enough progress, keeping his rate outlook" (article from CNBC)

"Zoom to lay off 1,300 employees, or about 15% of its workforce" (article from CNBC)

“Yahoo to lay off more than 20% of staff” (article from Yahoo! Finance)

"Affirm seeks new sponsor banks as it shifts to interest-bearing loans" (article from S&P Global)

"LA landlords must pay to relocate tenants facing hefty rent hikes" (TheRealDeal via Instagram)

"There’s a new inflation warning for consumers coming from the supply chain" (article from CNBC)

"Stablecoin issuer Paxos ordered to halt creation for Binance USD" (article from Yahoo!)

Ian Shepherdson, founder and chief U.S. economist of Pantheon Macroeconomics, believes that home prices may fall another 15% in 2023, citing the large disparity between property costs and buyer incomes. He predicted the eventual housing crash of 2008 in 2005 and recently suggested that the price-income gap, coupled with increased house supply and high mortgage rates, may precipitate a period of continued deceleration of the housing market rather than a significant rebound this year.

In this episode of The Higher Standard, Chris and Saied examine this prediction, and attempt to determine just how likely it could be based on current data.

They discuss comments from Zillow senior economist Jeff Tucker, who says that, in 2022, homeownership was further out of reach than it has been in modern recorded history. While home prices and mortgage rates may be falling, making the market at least a little more accessible, they’re doing so from historic highs.

Chris and Saied look at an interview with Minneapolis Fed President Neel Kashkari, who said that explosive jobs growth is evidence that the central bank has more work to do when it comes to taming inflation, including more hikes to interest rates.

They also offer some thoughts on the differences between the affordability crisis this time around, and the last recession.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• The difference between being data-driven and data-based.
• Why Bob Iger is right-sizing the company to weather the storm and to be more efficient, returning more profits to the shareholders.
• Why Zoom has laid off 15% of its workforce.
• What would happen if the Fed started lowering rates again and the effect it would have on inflation?
• And so much more...

Resources:

"Economist Who Predicted the 2008 Housing Crash Says Home Prices Will Drop 15% in 2023" (article from Yahoo! Finance)

"Home prices are falling, but that doesn’t mean they’re affordable" (article from Grid)

"Bob Iger Outlines New Disney Org Structure, With 7,000 Job Cuts Planned" (article from The Hollywood Reporter)

"Fed’s Neel Kashkari says central bank has not made enough progress, keeping his rate outlook" (article from CNBC)

"Zoom to lay off 1,300 employees, or about 15% of its workforce" (article from CNBC)

"Yahoo to lay off more than 20% of staff" (article from Yahoo! Finance)

Employers added more jobs in January than expected, while the unemployment rate fell to a 53-year low, underscoring the resilience of the labor market despite the Fed's aggressive tightening campaign. ⁣ Nonfarm payrolls increased 517,000 last month after an upwardly revised 260,000 gain in December. The figure beat all estimates from economists, who called for a 188,000 gain in payrolls. The unemployment rate dropped to 3.4%, the lowest since May 1969, and average hourly earnings grew at steady pace.

In this episode of The Higher Standard, Chris and Saied examine this news, and determine the effect this will have on the economy as a whole.

They discuss ARK Investment Management CEO Cathie Wood’s comments that ARK is "the new Nasdaq," adding that her flagship fund now gives investors better exposure to long-term innovation than most of the market’s most popular growth stock benchmarks.

Chris and Saied look at a report stating that benchmark 10-year U.S. Treasury yields hit four-week highs after the recent employment numbers raised expectations that the Fed's rate hikes will not end with a hard economic landing, and that the U.S. central bank may have more than one more rate increase left.

They also offer some thoughts on Blackstone's plans to ramp up evictions to help its struggling real estate investment trust.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why wages aren't keeping up with inflation, and what the next stage of the Fed's pivot might look like.
• Why the world’s largest cryptocurrency exchange is temporarily suspending deposits and withdrawals of US dollars.
• Why FTX debtors are calling on politicians, parties and PACs to return tens of millions in campaign contributions.
• The definition of a depreciation amortization benefit.
• And so much more...

Resources:

"US adds 517,000 jobs in January, far exceeding economists forecasts" (Bloomberg Business via Instagram)

"Jobs Report Tells Markets What Fed Chairman Powell Tried to Tell Them" (article from Barron's)

"A New Supercycle Is Starting, Says This Macro Strategist. How to Invest." (article from Barron's)

"Cathie Wood says AARK is "the new Nasdaq" (Bloomberg Business via Instagram)

"Binance to Suspend US Dollar Transfers Using Bank Accounts" (article from Bloomberg)

"TREASURIES-Yields hit four-week highs, Fed expected to hike above 5%" (article from Yahoo! Finance)

"Blackstone ramps up tenant evictions" (TheRealDeal via Instagram)

Real estate brokers across the country are using ChatGPT to pen emails and write property listings. The AI chatbot ChatGPT has made waves in sectors from tech to media since it launched to the public two months ago. As the AI software grows in popularity, people are finding more and more creative ways to put the tech to use — including making it write flowery descriptions for real estate listings. As the technology emerges as a tool for realtors, some experts say AI is well on its way to becoming an industry standard. Use of AI has spread far and wide among realtors. Miami broker Andres Asion has even used the tech to rewrite emails, emphasizing legal liabilities and implications.

In this episode of The Higher Standard, Chris and Saied examine the explosion of AI and its use by business - not to mention its darker uses, such as creating fake social media accounts.

They discuss the news that major U.S. stock indexes closed over 1% higher as labor cost data encouraged investors about the Federal Reserve's aggressive approach to taming inflation a day ahead of the central bank's critical policy decision.

Chris and Saied look at a report stating that Blackstone, one of the country's biggest landlords, is ramping up evictions to help its struggling real estate investment trust.

They also offer some thoughts on news from payroll processing firm ADP, which is reporting that job creation in the private sector plunged in January as weather-related issues kept workers home. Companies added just 106,000 new workers for the month, down from an upwardly revised 253,000 the month before.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• The biggest winners and losers from the Fed's latest interest rate hike.
• How long it takes for recessionary effects (aka lagging indicators) to show up.
• Why (and how) people are using AI to create fake social media accounts.
• Mark Zuckerberg's record $12.5 billion day.
• And so much more...

Resources:

"More Americans are falling behind on car payments than during the 2008 financial crisis" (Bloomberg via Instagram)

"California DMV is now on the blockchain. Why that’s a bigger deal than you think" (article from Fortune)

St. Louis Fed Economic Data

"Biggest winners and losers from the Fed’s interest rate hike" (article from Yahoo! Finance)

"Wall St gains over 1% after encouraging inflation data with Fed next" (article from Yahoo! Finance)

"S&P 500 advances more than 1% to its best level in five months as Meta leads tech-fueled rally" (article from CNBC)

"US Job Openings Surge Past 11 Million as Fed Zeros In on Labor" (article from Bloomberg)

"Private payroll growth slowed to 106,000 in January as weather hit hiring, ADP says" (article from CNBC)

"That real estate listing you just saw for your dream house may have been written by ChatGPT" (article from Business Insider)

"Blackstone ramps up tenant evictions" (TheRealDeal via Instagram)

"Zuckerberg Gains Record $12.5 Billion in a Day as Meta Rebounds" (article from Bloomberg)

According to an index of building occupancies in 10 major metro areas by security firm Kastle Systems, more than half of workers went to the office last week, the first time that return-to-office rates crossed 50% of their pre-pandemic levels. All of the cities tracked by the company — including San Francisco, Chicago and Austin, Texas — reached return-to-office levels of 40% or above, which was also a post-pandemic first.

In this episode of The Higher Standard, Chris and Saied examine this and many other stories and attempt to cut through the spin and the rhetoric to get at the truth.

They discuss comments from Starwood Capital's Barry Sternlicht, who said that, if Jerome Powell continues down the path that we're going, he's going to drive the economy into a horrible situation because the government won't be able to afford to pay its bills, and why that thinking is flawed.

Chris and Saied look at a survey by Pymnts.com and Lending Club, which indicates that the share of Americans who say they live paycheck-to-paycheck climbed last year to 64%, and most of the new arrivals in that category were earning more than $100,000 a year.

They also offer some thoughts on the Fed's decision to reject Wyoming-based crypto-centric bank Custodia's application to become a member of the central bank's exclusive payment system, saying that the firm's proposed business plan, and focus on crypto assets, presented significant safety and soundness risks.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why the Fed rejected Custodia's application to join the US payment system.
• Why the market's reactions are disconnected from what the Fed is trying to accomplish.
• The five types of treasury securities
• The importance of staying true to your budget when looking for a home.
• And so much more...

Resources:

"Fed rejects crypto bank’s application to join U.S. payment system" (article from MarketWatch)

"Inflation Fell but so Did Spending. The Economic Signals Are Both Good and Bad" (article from Barron's)

"National home prices have further to fall, say 24 leading housing market researchers—while 5 firms think prices have bottomed" (article from Fortune)

"Wall Street Is Losing Out to Amateur Buyers in the Housing Slump" (article from Bloomberg)

"US offices reach 50% occupancy for the first time since Covid" (Bloomberg Business via Instagram)

"More Americans are living paycheque-to-paycheque, even those on more than $100,000" (Bloomberg Business via Instagram)

According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage interest rates fell for the third straight week, while mortgage demand also rose again. Total application volume increased 7% last week compared with the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.2% from 6.23%, with points increasing to 0.69 from 0.67 (including the origination fee) for loans with a 20% down payment. That rate was just about half that one year ago.

In this episode of The Higher Standard, Chris and Saied examine this news and determine the effect it will have on the housing market and the economy as a whole.

They discuss data released by the Salt Lake Board of Realtors on their UtahRealEstate.com website, which states that Utah’s most populated county, Salt Lake County, has seen its first year-over-year decline in housing prices since 2011.

Chris and Saied look at Goldman Sachs' forecast of record drops in San Diego's home prices, saying that home values will fall at levels similar to the 2008 crash. The predictions indicate that San Diego, San Jose, Austin, and Phoenix will see declines of more than 25%.

They also offer some thoughts on the rise of fourth-quarter gross domestic product of 2.9%. Economists surveyed by Dow Jones had expected a reading of 2.8%.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why the World Economic Forum is not a true economic forum.
• Why GDP is a good indicator for a recessionary economy.
• The concept of student loan forbearance.
• How the Federal Reserve pulls money out of the system.
• And so much more...

Resources:

"Most economists expect a US recession in 2023, but nailing the timing is a tall order" (Bloomberg Businessweek via Instagram)

"Two in three Americans cannot cover a $400 emergency expense" (Bloomberg Business via Instagram)

"Money Supply Shrinks for the First Time. What It Says About Inflation and the Economy." (article from Barron's)

"Want To Know Where House Prices Are Heading In 2023? Watch Mortgage Rates" (article from Forbes)

"Salt Lake County, Utah housing prices drop 6% — the first year-over-year decline in 11 years" (article from Deseret News)

"Goldman Sachs forecasts 2008-sized crash in San Diego housing market" (CBS8 via Instagram)

"U.S. GDP rose 2.9% in the fourth quarter, more than expected even as recession fears loom" (article from CNBC)

"'Big Short' Burry Suggests the Stock Market Jump Is a Mirage" (article from The Street)

"BofA warns that the US economy will begin to lose 175,000 jobs per month in Q1 of 2023, expects a ‘harder landing’ rather than a softer one — here’s why" (article from Yahoo! Finance)

"Weekly mortgage demand jumps 7% as interest rates drop to lowest level since September" (article from CNBC)

New York Fed Website - Domestic Security Holdings

Bureau of Economic Analysis for GDP

The job cuts in the tech industry continue to pile up. Google announced plans to lay off 12,000 people from its workforce, while Microsoft said that it’s letting go of 10,000 employees. Amazon also began a fresh round of job cuts that are expected to eliminate more than 18,000 employees and become the largest workforce reduction in the e-retailer’s 28-year history. The layoffs come in a period of slowing growth, higher interest rates to battle inflation, and fears of a possible recession next year.

In this episode of The Higher Standard, Chris and Saied examine this news and as always, attempt to determine how it affects the economy as a whole.

They discuss a report from the Commercial Observer, based on data from Cushman and Wakefield, which shows that the vacancy rate in the fourth quarter for shopping centers was 5.7 percent, the lowest level in 15 years.

Chris and Saied look at an item from CNN stating that the US hit the debt ceiling set by Congress on Thursday, forcing the Treasury Department to start taking extraordinary measures to keep the government paying its bills and escalating pressure on Capitol Hill to avoid a catastrophic default.

They also offer some thoughts on the unexpected drop in unemployment benefits claims that occurred last week, suggesting a tight labor market, despite higher interest rates.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• The debt ceiling: What it is and why it matters.
• Why home sales have slumped to a 12-year low.
• How much of the return to offices is because of executive level productivity vs. morale.
• The problem with ego and the distorted reality it can create.
• And so much more...

Resources:

"US hits debt ceiling, prompting Treasury to take extraordinary measures" (article from CNN Politics)

"Google, Microsoft, Amazon and other tech companies have laid off more than 70,000 employees in the last year" (article from CNBC)

"US shopping center vacancy hits 15-year low" (The Real Deal via Instagram)

"The curtain is closing on these Regal theaters in SoCal" (NBCLA via Instagram)

"U.S. home sales slump to 12-year low; glimmers of hope emerging" (article from Reuters)

"U.S. will hit its debt limit Thursday, start taking steps to avoid default, Yellen warns Congress" (article from CNBC)

"Tamer CPI Inflation Rate Should Keep S&P 500 Rallying Until The Fed Meeting" (article from Investor's Business Daily)

"Economists in WSJ Survey Still See Recession This Year Despite Easing Inflation" (article from The Wall Street Journal)

"Inflation isn't coming down without a recession and interest rates will continue to skyrocket, JPMorgan Asset Management investment chief says" (article from Yahoo! Finance)

"Wholesale prices fell 0.5% in December, much more than expected; retail sales fall" (article from CNBC)

"U.S. weekly jobless claims unexpectedly fall" (article from CNBC)

"Google employees scramble for answers after layoffs hit long-tenured and recently promoted employees" (article from CNBC)

"Spotify cuts 6% of its workforce — read the memo CEO Daniel Ek sent to staff" (article from CNBC)

The SEC are suing two crypto brokerages - Genesis Global Capital and Gemini Trust Co. - for breaking securities rules. The SEC says that the firms illegally raised billions of dollars from hundreds of thousands of investors through the so-called Gemini Earn program. That product, which let customers loan out their assets in exchange for interest payments, amounted to the offering of unregistered securities. Gemini launched Earn in February of 2021, with the idea of offering users passive returns on their coins in exchange for the right to lend the tokens out. By August, the program, which offered rates that far exceeded those on traditional bank accounts, crossed $3 billion in assets.

In this episode of The Higher Standard, Chris and Saied examine this news and try to determine what it means for the embattled crypto industry as a whole.

They discuss the problem with fake followers and accounts on social media and how people can use these tactics to attack others and get social accounts blocked or even banned.

Chris and Saied look at the difficulty with artificial intelligence and why Congress may be too late to the party in trying to regulate it and anything to do with the internet.

They also offer some thoughts on a reportedly 'risky' move by American Express, in which they have reinvented the Platinum card to make it more desirable to younger urbanites, increasing the annual fee well above those of its competitors - a strategy which seems to have worked.

Join Chris and Saied for this fascinating and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• Why it's now possible to 'buy now, pay later' on things like pizza.
• Why Chris thinks Shark Tank is just a money grab and why he dislikes Kevin O'Leary.
• JP Morgan’s claim that it was 'duped' into acquiring fintech startup Frank, due to lies about Frank's scale and success, created by an enormous list of fake users.
• A look at the due diligence process for a bank during the acquisition process.
• And so much more...

Resources:

"FTX finds over $5 billion in liquid assets, judge extends ruling keeping creditor names secret" (article from Yahoo! Finance)

"Microsoft reportedly plans to invest $10 billion in creator of buzzy A.I. tool ChatGPT" (article from CNBC)

"Coinbase to lay off 20% of workers in latest sign of crypto industry pain" (article from Yahoo! Finance)

"The SEC is suing crypto brokerages Genesis and Gemini" (Bloomberg Business via Instagram)

"The ‘Buy Now, Pay Later’ Bubble Is About to Burst" (article from The Atlantic)

"AmEx Hooked Big Spenders and Regained the Throne With a Pricier Platinum Card" (article from Bloomberg)

"Inside the Secretive World of Shark Tank Deals: Who the Real Winners are" (Forbes via Instagram)

"JP Morgan says startup founder used millions of fake customers to dupe it into an acquisition" (Forbes via Instagram)

"Stan Smith Shoes" (Addidas)

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