The Higher Standard

On Sunday, the Federal Reserve announced that it would hold a previously unscheduled meeting where some of the matters to be discussed will include, according to the Fed's website, “review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.” It's being called an 'emergency' meeting, bu in reality, closed-door Fed meetings like this happen all the time. There have been about 15 meetings over the last year.

In today's episode of The Higher Standard, Chris and Saied take a look at what this meeting may or may not be signalling, as well as some hard truths about Fed Chair Jerome Powell's attempts to fight inflation.

They discuss why, when Powell tells you he wants to reduce inflation, he’s actually telling you the central bank needs investors to lose money.

Chris and Saied discuss a story about Nala Robotics, an AI company that has launched a fast food robot that, it claims, can fry chicken wings, french fries and other foods, season them and do it all autonomously. It's called the WingMan. Is this the response to the increase of minimum wages?

They also discuss how the tightening of the economy is affecting businesses. Bankruptcies and hiring freezes are happening across the country, and larger businesses like Meta are saying that they need more efficiency out of employees.

Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• What the Fed's 'emergency' meeting really means for the market.
• Why Jerome Powell needs investors to lose money, in the hopes that those losses will seep into the rest of the economy when capital investments and consumption decline, slowing growth, demand and ultimately inflation.
• The possibility of AI and robotics replacing workers as a response to minimum wage increases.
• The effects of the Fed's aggressive tightening of economic policy, and the effect it's having on businesses.
• And so much more...

Resources:

https://www.federalreserve.gov/aboutthefed/boardmeetings/20221003closed.htm

https://www.bloomberg.com/news/articles/2022-09-29/jay-powell-needs-investors-to-lose-money-until-inflation-comes-down?utm_campaign=instagram-bio-link&utm_medium=social&utm_source=instagram&utm_content=businessweek

https://www.forbes.com/sites/johnkoetsier/2022/09/28/robot-fast-food-cook-costs-less-than-half-a-hum...

https://www.cnbc.com/amp/2022/09/27/chipotle-mexican-grill-will-test-robotic-tortilla-chip-maker-.ht...

https://www.cnbc.com/2022/09/30/elon-musk-shows-off-humanoid-robot-prototype-at-tesla-ai-day.html

As you can see from the collection of articles added below, the housing recession has finally reached a point where only the most oblivious could possibly claim that it's not happening. Despite the best efforts of the Fed to control inflation, jobless claims and mortgage rates are rising, and housing prices are falling. What does all this mean for the economy? Chris and Saied are here to offer some thoughts.

In today's episode of The Higher Standard, Chris and Saied take a look at all this new information to try and understand the economic implications of it all, starting with an article from CNBC stating that a new report from Redfin shows that home purchase cancellations are above 15% for the second straight month.

They discuss why the Fed's attempts to curb inflation seem to not be going well. The difficulty is that the primary method for curbing inflation - raising the Fed borrowing rates and pulling out liquidity with quantitative tightening - has an impact on earnings for corporations, which has its own implications.

Chris and Saied discuss a recent article from Bloomberg which states quite clearly that US housing prices have fallen for the first time since 2012, and one from Fortune, reporting that housing prices have plunged in 77% of US metro areas.  

They also discuss the many reasons to be wary of advice from people like Grant Cardone, and why Cardone Capital is not a real estate investment trust, but a long-term investment vehicle.

If you have burning questions about commercial real estate, this is the episode you've been waiting for! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• The reasons why in August, 15.2% of home purchase agreements fell through, similar to 15.5% in July, according to a new report from Redfin.
• Why the Fed's efforts to curb inflation has repercussions for corporations as revenue is drawn away, along with earnings.
• Why 'The Turn has Finally Happened,' according to Fortune, while mortgage rates have hit 6.7%, the highest rate in two decades.
• Some important considerations to keep in mind when listening to so-called "experts" like Grant Cardone.
• And so much more...

Resources:

"Home Purchase Cancellations are Above 15% for the Second Straight Month." - article from Apple News

"US Housing Prices Fall for First Time Since 2012" - article from Bloomberg

"Housing Prices Plunge in 77% of U.S. Metro Areas: 'The turn has finally happened'" - article from Fortune

Original Research Article - AEI research document

"U.S. pending homes sales post third straight monthly decline in August" - article from Apple News

"'The Fed Trying to Control Inflation Actually Created More Damage': Grant Cardone Says the Fed Ended Most People's Chance of Owning a Home" - article from Yahoo! Finance

"Jobless Claims Hit Five-Month Low Despite Fed’s Efforts to Slow Labor Market" - article from CNBC

"US Mortgage Rates Jump to 6.7%, Hitting Highest Level Since 2007" - article from Bloomberg

"Meta is Reportedly Putting Some Workers onto a '30-Day List' that Gives them a Month to Find a New Role at the Company — or Leave" - article from Yahoo! News

According to a recent article from Bloomberg, Federal Reserve Chair Jerome Powell said the US economy may be entering a 'new normal' following disruptions from the COVID-19 pandemic during a Fed Listens event in Washington last week. He outlined the "unusual set of disruptions'' the Fed is dealing with, and reiterated a commitment to help the economy through a "uniquely challenging period." The real question is, as warm and fuzzy as these 'Fed Listens' seem to be, do they have any effect on actual monetary policy? Is it a genuine attempt to listen to business and community leaders, or is simply an academic in good PR? As you might expect, Chris and Saied have some thoughts...

In today's episode of The Higher Standard, Chris and Saied take a deep-dive into real estate, particularly commercial real estate, covering subjects such as the recently raised Federal Funds Rate and some of the more obscure inner workings of multi-family and commercial real estate.

They explore an article from TheRealDeal.com stating that Keller Williams is looking to train their agents as wealth advisors going forward, and the implications of that kind of move on the real estate industry.

Chris and Saied look at mortgage rates and why they're very unlikely to come down in the near term, thanks to the current yield curve inversion that has been the precursor to nearly every recessionary economy in history.

They also discuss multi-family and commercial real estate issues, such as the definition of a 'loan amount,' why the barrier to entry in commercial real estate is so high, and how long it usually takes to close a multi-family deal.

If you have burning questions about commercial real estate, this is the episode you've been waiting for! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• Why the Federal Reserve recently increased the Federal Funds Rate and how it will impact mortgage interest rates.
• The case for ensuring real estate agents have a solid economic understanding of the products they're selling, and the possible perils of going down that road.
• The reasons why mortgage rates are not likely to come down in the near term, due to upward pressure on the long end of the yield curve.
• Why real estate investing is the common source of wealth in the country.
• And so much more...

Resources:

"Keller Williams Aims to Train Agents as Wealth Advisors" (article from TheRealDeal.com)

"Powell says Economy May be Entering ‘New Normal’ After Pandemic" (article from Bloomberg)

If you've been following the news of late, you're probably aware that the Ethereum merger has been completed, as the cryptocurrency switches to the proof-of-stake (PoS) mechanism for verifying transactions on the blockchain. The move was intended to fix some of Ethereum’s problems by improving transaction speed and making them cheaper. However, the price has dropped since the transition on September 15.

In today's episode of The Higher Standard, Chris and Saied's wide-ranging discussion takes on everything from Ethereum's merger and the Fed fund's target rate, to the recent 900-point drop in the Dow Jones Industrial Average.

They explore the strange period of fluctuation we've entered in the real estate market where homeowner's mortgage payments are so low, relative to the property they bought, they don't want to sell, they want to rent.

Chris and Saied also look at the reasons why China is no longer as inexpensive as it once was for labor and goods. Vietnam and India have begun to eclipse China with cheaper workforces and lower costs of production.

They also offer some opinions on what they believe owner occupied 30-year mortgage interest rates will look like and why the 900-point drop in the Dow was caused by pricing in the Fed's most recent rate hike.

This is a show you do not want to miss! Join Chris and Saied for this wide-ranging and informative conversation.

Enjoy!

What You’ll Learn in this Show:

• The details behind Ethereum's recent network upgrade and merger and what that could mean for the cryptocurrency going forward.
• The premise behind the new Federal reserve target rate, and why the Fed doesn't just increase the Fed funds target rate.
• Why homeowners are now choosing to rent their properties rather than sell due to unusually low mortgage payments.
• The 900-point drop in the Dow, and why it indicates the market is simply "pricing in" the Federal Reserve's 0.75% rate hike.
• And so much more...

The inflation numbers have been released, and the news is not good for anyone. The Consumer Price Index (CPI) has increased to 8.3%. A 10.6% decline in gasoline prices was offset by increases in rent, food and health care. Food prices rose by .8%, with the cost of food consumed at home increasing by .7%. The increase in CPI feeds into the argument Chris and Saied have been making for some time, and that so many social media personalities refuse to accept.

In today's episode of The Higher Standard, Chris and Saied discuss these new CPI numbers, the effect they're having on the economy, and the effect they will have on the Fed's upcoming rate hike decisions.

They discuss the market's reaction to the news, including the increasing possibility that the Fed could bypass the .75% increase and go straight to a 1% increase.

They also look at a recent report from Moody's Analytics, which says there are now 210 housing markets across the nation that are "significantly overvalued" — or overvalued by more than 25%. In those markets, Moody's predicts home prices to fall 5% to 10%. If a recession hits? Home prices in those regions could take 15% to 20% hits.

Chris and Saied also discuss the phenomenon that is Kaby Lame, the TikTok star with 150 million followers, who is reportedly on track to make $150 million a year.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• Why the recent CPI numbers could signal a 1% increase from the Fed.
• Moody's report of "significantly overvalued" housing markets across the country, which could lead to a massive price drop.
• How Khaby Lame could be making as much as $10 million a year as a social media personality - without ever saying a word.
• And so much more...

According to an article from Bloomberg, homebuyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices tumbling. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset.

In today's episode of The Higher Standard, Chris and Saied discuss this painful housing reset in some of the hottest markets around the world, even as some so-called influencers continue to claim that house prices won't fall in the U.S. - even though they already are.

They discuss the increase in rent that appears to be rising as fast as the cost of buying (as in, rising interest rates). The latest figures from the Mortgage Bankers Association and the US Census Bureau show that rents have risen approximately 10% since the fourth quarter of 2020.

They look at Fed Governor Christopher Waller's comments that he expects to raise the central bank’s benchmark interest rate 75 basis points this month, though he’s open to a larger move depending on incoming data.

Chris and Saied also revisit the Inflation Reduction Act (Chris is still not a fan) and explain why it really is about printing money, despite what the naysayers claim.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• The latest figures from the Mortgage Bankers Association and the US Census Bureau, showing that rents have risen approximately 10% since the fourth quarter of 2020.
• Fed Governor Christopher Waller's recent comments about an expected 75 basis point increase, and the reasons why he's comfortable with an even higher increase if required.
• The Inflation Reduction Act and why it really IS about printing money, despite what the naysayers claim.
• And so much more...

It would appear that yet another prediction made by Chris and Saied has proven itself true: The bond and treasury markets would start moving and put upward pressure on the 30-year mortgage rate. According to a headline from CNBC, mortgage demand from homebuyers has fallen 29% since last year, as interest rates surge past 6%. Application volume dropped 1.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

In today's episode of The Higher Standard, Chris and Saied discuss this data as well as Jerome Powell and the Fed's desire to be as communicative as possible as we approach a likely 75 basis point increase.

They talk about Cineworld's reported decision to file for chapter 11 'reorg' to address a potential liquidity crunch, restructure more than $5 billion of debt and resolve a $950 million adverse court judgement. Chris also explains the difference between a reorg and a standard bankruptcy procedure.

Chris and Saied look at Amazon's decision to reduce the size of its sprawling delivery operation amid slowing sales growth, by abandoning dozens of existing and planned facilities around the US.

They also explore Bank of America's new loan program created for Black and Hispanic neighborhoods to boost homeownership where it lags. The result was a PR disaster that had some pundits claiming it was 'racist,' while others say the media misconstrued the intent. Either way, it's a mess.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• The difference between a chapter 11 reorganization and a standard bankruptcy procedure as it applies to business.
• Why Amazon is abandoning dozens of existing and planned delivery facilities around the US.
• The PR confusion surrounding Bank of America's new loan program created for Black and Hispanic neighborhoods to boost homeownership.
• And so much more...

Despite a few naysayers who still cry fowl, the housing recession (as it's been called by the National Associations of Realtors) continues as the Fed battles inflation. The reasons for the 'pretend it's not happening' attitude among a few pundits and so called influencers is baffling as it conflicts with nearly every data point and the opinions of many economists and experts in the field.

In today's episode of The Higher Standard, Chris and Saied discuss some of the most recent data points on the housing market, and how this information will affect you.

They discuss why many people believe that a credit crunch is the only path to difficult times, and why that kind of thinking is incorrect, if not delusional.

Chris and Saied look at the disturbing trend of otherwise intelligent people making comments and predictions that lack any kind of economist-based reasoning. They explore the idea of putting feelings before data, and why that leads to confusion and misinformation.

They also explore the latest jobs report indicating that unemployment has risen slightly from 3.5 to 3.7%, and explain why it contains some positive things for the job market, further confusing people as to where the economy is headed.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• The 'delusional' idea that a credit crunch is the only path to difficult times.
• Why otherwise intelligent people are putting feelings before data, and why that's dangerous.
• The latest jobs report, and why it will only add to the confusion around the economy's direction.
• And so much more...

Recently, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, an economic indicator that measures the change in value of U.S. single-family homes on a monthly basis, picked up the first month to month price drops. All of them were found in the West, in the metros of Seattle, San Francisco, San Diego, Los Angeles, Denver and Portland. Normally, the index lags reality by approximately 4-6 months, but the numbers are telling.

In today's episode of The Higher Standard, Chris and Saied explore these results as well as more evidence backing up a significant decline in housing demand - as Chris has been suggesting for some time now.

Chris and Saied discuss the now unequivocal fact that people like Dave Ramsey and Lawrence Yun, the National Association of Realtors chief economist, were wrong in their assertions and predictions. They also review some of the interesting new data around new and existing home sales, and mortgage applications, all of which are going down.

They discuss an article from Fortune magazine saying that Goldman Sachs now forecasts the U.S. housing market downturn will be worse in 2023. They predict sharp drops this year in new home sales of 22%, existing home sales of 17%, and housing GDP of 8.9%.

They also discuss why many people seem to be clinging to the 'logical fallacy' of a growth recession - the idea that you can be in a recession and still have growth in the economy.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• New data showing unequivocally that people like Dave Ramsey and other recession naysayers were wrong.
• Goldman Sachs’ new forecast, suggesting the U.S. housing market downturn will be bad in 2022, and continue into 2023.
• Why the idea that you can be in a recession and still have growth in the economy is a logical fallacy - one in which many people seem to believe.
• And so much more...

Jerome Powell has recently held a press conference following the Fed's annual Jackson Hole meeting, and his comments were interesting, not to mention immediately impactful, as they eviscerated approximately $70 billion in value from the market the following day.

In today's episode of The Higher Standard, Chris and Saied share their thoughts on Powell's remarks and the effects they may have in the days to come.

They discuss why Powell believes that, as the Fed tightens and fights to bring down inflation, higher interest rates likely will persist "for some time," and why the historical record cautions strongly against prematurely loosening policy.

Chris explains why people did not know they were in a recession in 2008, until NBER, the National Bureau of Economic Research, declared a recession almost a year later. We can look back and identify the factors that led to the Great Recession, but we're not in a position to identify those factors at the moment.

They also discuss the interesting correlations between the current housing market (with a 10.9 month supply of new houses - a healthy market sits around 4-6 months) and the time during the Great Recession, when the monthly supply of new houses was sitting around 12.

This is a show you do not want to miss! Join Chris and Saied for this fascinating conversation.

Enjoy!

What You’ll Learn in this Show:

• Powell's belief that higher interest rates likely will persist "for some time."
• Why it's easy to look back and identify the factors that led to the Great Recession in 2008, but not so easy to identify them in today's market.
• Interesting - and possibly worrying - correlations between the current monthly supply of new homes and that which existed during the Great Recession.
• And so much more...